Jan

12

In considering support systems in markets, one would certainly not wish to overlook Thigmomorphogenesis ( which I believe formed the basis of the modern boy wonder's systems) which are height and thickness responses to strong winds to make the tree more stable.

One often finds that after a big move in an individual stock or market, there is much backing and filling, reversals, and gravitational moves to the close of the big move, before further growth or decline ensues. The question is whether such phenomena are predictive and how to test. Perhaps in the spirit of David Brooks, who better to ask then the specs. We have foresters and technicians among us.

Vic further adds:

Many trees are supported by roots attached to the trunk as seen here. I am wondering if this natural phenomenon, used widely in architecture and engineering, has its counterpart in markets, and whether this can be quantified and whether it creates for more stability. I wonder what other support systems exist, their prevalence and function.

J.T. Holley comments: 

As mentioned before on the List, while I was in Wilmington, NC a few years back, the Bald Cypress trees have a wonderful support system and are a great metaphor for the markets. Not only do they have the buttressing effect with their bottom trunk, but they also possess "knees" that serve both to get oxygen to the roots and to further support the tree in the silt laden waters. 

Mentally, picture the bids and asks around the market price of a stock. They too are the "knees" that feed oxygen to the price. I will try to type a rudimentary picture:

b = bid      a = ask      x = price

       X
       X     a
 b     X     a
b b b b X a a a a

As the bids and asks move together in compromise they feed the price, adjusting upwards and also downwards. The bids and asks can form the "knees" by having a larger size than that on either side of it, bringing either strength or weakness towards the price inwards. The key in attempting to quantify might be to see how "fat" the price attributing to the buttressing effect is. Do round numbers have more of a buttressing effect and stability? Do low beta stocks have fat buttressing? 

For what it's worth, the Bald Cypress lives along the water's edge. I've been told that trees that have large and big leaves act as "sails on a boat" when hurricanes blow through and they get easily knocked down. The Bald Cypress seems to be well adjusted in the South in combating Mother Nature's breath by having well adapted leaves for this theory and the buttressing is the kicker. They are the most amazing trees next to the Sequoia's that I've witnessed in my life.

Scott Brooks adds:

Based on the link Vic provided, we've learned that trees don't collapse on their weight. This is incongruent with trading as stocks collapse all the time from their own weight (i.e. tulip mania, .com bubble, etc.)

What I found interesting in the wikipedia search is that the more a tree limb is rubbed, the more their growth pattern is altered and as a result the limb gets thicker (and stronger I assume). This may be analogous to a stock building a base before moving up (growing). There seems to be a disconnect here as a stock that is heavily traded (rubbed) would likely move strongly in one direction. Stocks seem to build bases when there is a lack of excess interest in one direction or another (interest in buying is equal to interest in selling). It's not until there are more buyers lined up to buy than there are sellers willing to sell that the base is broken to the top side. The inverse is true for breaking to the downside.

Thigmomorphogenesis is the response by plants to mechanical sensation (touch) by altering their growth patterns. In the wild, these patterns can be evinced by wind, raindrops, and rubbing by passing animals.

M.J. Jaffe discovered in the 1970s that regular rubbing of bending of stems inhibits their elongation and stimulates their radial expansion, resulting in shorter, stockier plants.

Growth responses are caused by changes in gene expression. This is likely related to the calcium-binding protein calmodulin, suggesting Ca2+ involvement in mediating growth responses.

Mark Goulston offers:

Here is another interpretation of thigmomorphogenesis. “The more a tree or plant is rubbed, the more its radial vs. elongated growth increases” is a metaphor for "the more hits that life smacks you with, the wider your stance better be to endure subsequent ones." This is not unlike cowboys circling the wagons when under attack, or animals hunkering down to diminish their exposed area to repeated attacks. The question is how much this is a reaction to attacks vs. an anticipation of future attacks where the most Darwinian evolved to withstand future attacks (that actually occur vs. merely a bubbameister) will out survive peers. On the other hand, if there are no future attacks, such an increased girth or widened stance will limit your movement and flexibility.

The interpersonal equivalent is that when nobody is attacking you and you act defensively, you are perceived by the other as being on the offensive.

No wonder the world will always needs shrinks and lawyers.

John Kuhn comments:

There is a giddy feeling when one of one's holdings experiences the "long bar" lurch. One is almost helpless to push the sell button. Yet as with those vomitous feelings engendered by unimpeded collapse, so with the inebriating joys of rapid equity advance … many an optimal moment for action is signaled in the emotion. As a counting incompetent, many of my best moves are in fading the long bar, and more of my worst, by failing to do so.

Jack Tierney adds:

What I found interesting in the wikipedia search is that the more a tree limb is rubbed, the more their growth pattern is altered and as a result the limb gets thicker (and stronger I assume).

I wasn't aware of this (or of much else), but this comment triggered a memory that goes back to a high school literature class. One day one of my fellow students popped up with the following rhyme: 

A woman, a dog and a walnut tree, the more you beat them, the better they be. 

As I recall, Mrs. Rigsby wasn't terribly amused and even less so when the offender couldn't name the source. The rest of us didn't much concern ourselves with that - instead we pondered how such treatment could benefit a tree (it was an accepted truism for the other two). 

Scott's remark moved me to Google the line which remained buried in the recesses of my mind. It's attributed to Thomas Fuller, a "British Clergyman and Writer, one of the most prolific authors of the 17th century. 1608-1661." 

So it only took 50 years or so to find a possible answer; I'm not sure that there's any market applicability involved.


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1 Comment so far

  1. Ray Thompson on January 13, 2007 3:02 pm

    It’s more like the free radical influence on polymer chains– alters the direction of the sequence, causing/resulting in inflection points. Works with great precision at market bottoms; less so at market tops.

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