Mar

26

Painting by Rubens

The yogis say our true nature is joy.  When we're laughing and truly having fun, perhaps that's when we're most being ourselves - and not the product of something else. G.P.

It is easy to be jocular and personable when things are going well, but you get to see who you really are when things are going badly. The energy required to maintain interpersonal facade is redirected toward survival. The market is a very good mirror. And a very bad one.

Bill Rafter adds:

Who you really are is very much like a stock in Portfolio Theory. The good side is the rate of return, but most compare that with the additional information of the standard deviation of the returns.

Similarly a person should be measured along the same lines. The person who is happy go lucky most of the time but occasionally has bouts of violent anger is not as desirable a friend as one who is relatively constant but with lesser high points.

Each person responds differently to stimulus. And as with stocks it is the bad side that is most important. Someone who is in a funk for a long time has the risk of getting clinically depressed, with physiological damage to the synapses.

Ken Drees comments:

I always liked the saying that "not all great companies are great stocks". Forgot who coined that one–maybe from the Livermore books that I have read. Meaning that the stock of the good company may not act or behave well for speculation. In general, it is interesting how stocks are given human qualities by specs.

Alex Castaldo replies:

Forget about Livermore. The first to warn about confusing good companies and good stocks was the late Peter Bernstein in the Harvard Business Review in 1956.  The idea was followed up by many people, including Solt and Statman (1989) and most recently Richard Bernstein .  

Kim Zussman generalizes and extends:

Galton weighed in on this, with five big personality traits: Openness, Conscientiousness, Extroversion, Agreeableness, and Neuroticism (OCEAN) In modern times, add Yeswecannyness, Islamocapitalist, and Amelanotaxophile.


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4 Comments so far

  1. Michael F. Martin on March 26, 2010 7:14 pm

    On a not unrelated note, we are mirrors for others, others for us.

    Suppose I make a move rashly, but cut myself short immediately thereafter and apologize. I can learn much about my friend (or “friend”) by observing her reaction. Some are merely a conduit for my actions. Others will damp or interfere with my actions. Still others will amplify me.

  2. Curmudgeon 4561 on March 27, 2010 7:23 pm

    Mr. Martin, your observations are reasonable enough. But the main point of the article was that the big market moves of 2007-2008-2009, and the stress they created in the trading rooms, have made us better acquainted with ourselves (and with our close colleagues). But the results are not always pretty; we have learned that under stress we do not always behave well.

    "The [Bear] market is a very good [accurate] mirror. And a very bad [unflattering] one."

  3. Gary Rogan on March 27, 2010 8:30 pm

    The market is a like an irregular mirrored enclosure surrounding the traders: everything that happens inside gets reflected by the walls back into the center, but via a trajectory that’s hard to predict.

  4. Michael F. Martin on March 29, 2010 3:48 pm

    Mean what you say and say what you mean. Or have fun with ambiguity. :-P

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