Feb
6
What Do Trees Tell Us About Markets, from Victor Niederhoffer
February 6, 2012 |
[Ed.: some field research on this topic recently. Why did this tree grow the way it did? And what are the implications?]
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Alice Allen writes in:
Years ago in the forest, a fledgling tree was noticed by hiking naturalists in the woods for its fortuitous position next to a large boulder that kept it from toppling when strong winds blew from the front. From all appearances, this was a lucky tree to have a neighbor with such gravitas willing to lend a shoulder to lean on early in its development. The tree, reaching toward the sky, would surely keep growing upright and strong!
Was it overconfidence that came with such an auspicious beginning that prevented the tree from sending its roots down under the boulder for stability and balance during stormy times? Or was it always fundamentally beyond the capabilities of any tree of that species to send roots down so far? Or maybe it was a combination of soil, weather, and location.
We do know that on one random cloudless, windless day, the tree collapsed across its supportive rock. To forest visitors, it looked sad and doomed. It would fail to become a perfect example of its prototype and would never pose for the shiny photo in the botany textbook.
But never rule out random redemption or random catastrophe, this time a positive miracle. Relieved of the pressure of supporting itself and aided in a more passive way by the hard, silent pillar below, the tree found the sun again and stretched heavenward back on its natural trajectory. Best of all, better than the textbook specimen, the tree became unique and memorable in its life.
So many trading strategies come to mind that can be discarded. Not ‘buy and hold…hold…hold.’ Not ‘never give up.’ Not ‘don’t accept outside help.’ Better I think to be reminded that when you accept help and assistance in the short term, you may also be accepting serious limitations you cannot forsee. Also miracles do happen, and not just to trees.
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I have never seen such a sight on a tree. I have seen this pattern regularly on stock charts. This reminds me of a breakout from a base The longer the base the greater the breakout. A bull market (the tree) climbs a wall of worry (the stone) Great stocks find a way to go up it is what they do.
conversely one can also see this in a breakdown in a stock. A stock will drop and the try to make a stand and then collapse when more bad news comes out. Either way a technical lesson here.
I wrote an article some years back on Bamboo and lessons to be learned there. The prevailing thought there is that bamboo spend many years barely growing and then suddenly they spring forward and grow to their full height in a few months.
Thus the age old question did the tree grow 100 feet in a few months or did it take years. Let’s go ask Mr. Owl.
Steve L.
Years ago in the forest, a fledgling tree was noticed by hiking naturalists in the woods for its fortuitous position next to a large boulder that kept it from toppling when strong winds blew from the front. From all appearances, this was a lucky tree to have a neighbor with such gravitas willing to lend a shoulder to lean on early in its development. The tree, reaching toward the sky, would surely keep growing upright and strong!
Was it overconfidence that came with such an auspicious beginning that prevented the tree from sending its roots down under the boulder for stability and balance during stormy times? Or was it always fundamentally beyond the capabilities of any tree of that species to send roots down so far? Or maybe it was a combination of soil, weather, and location.
We do know that on one random cloudless, windless day, the tree collapsed across its supportive rock. To forest visitors, it looked sad and doomed. It would fail to become a perfect example of its prototype and would never pose for the shiny photo in the botany textbook.
But never rule out random redemption or random catastrophe, this time a positive miracle. Relieved of the pressure of supporting itself and aided in a more passive way by the hard, silent pillar below, the tree found the sun again and stretched heavenward back on its natural trajectory. Best of all, better than the textbook specimen, the tree became unique and memorable in its life.
So many trading strategies come to mind that can be discarded. Not ‘buy and hold…hold…hold.’ Not ‘never give up.’ Not ‘don’t accept outside help.’ Better I think to be reminded that when you accept help and assistance in the short term, you may also be accepting serious limitations you cannot forsee. Also miracles do happen, and not just to trees.