Jun

8

The Inka Trail travels 47 km though the high Andes, on the edge of steep cliffs thousands of feet straight down, surrounded by majestic glacier covered peaks, rising over 4 thousand meters through steep passes, and Indiana Jones like hanging bridges over deep chasms with rushing rivers and though paths carved though solid granite stone with steps chipped out of the mountain itself, through high tropical jungles, with ancient ruins along the way, along side gurgling mountain rivers with ancient aqueducts crossing a regular intervals, culminating at the Sun Gate overlooking Machu Picchu. The trek is not for the the timid or weak, but did provide time for thought about many things including ideas about the market, up ward drift,natural philosophy, and life. Here are a few thoughts.

Big Tree Trade.

The trail is surrounded by a rich profusion of plants, reptiles, lichen, fungus, epiphites, orchids, mosses, bromeliads, trees, insects, birds, and rich geological features. All compete in the thin Andean high altitude for sun that peaks between the steep valleys and crags on rocky scratchy soil. A few large trees take a foothold on the steep steep mountain sides and protrude up through the jungle thicket. A profusion of life clings to the tree, all wrapping around the tree, the birds nesting, creating a whole ecosystem on the tree.

As the market follows nature a groundbreaking protruding company, such as Google that gains a foothold, protrudes through the thicket and dominates its space. To it clings a profusion of companies supported by the groundbreaking space, the new technology, allowing access to new markets, new opportunities. companies such as wine racks, face book, others that cling to the use of the new technology, and similar that will grow up big, fast on the back bone of the big tree. I have not tested this but welcome some ideas for small companies that might grow on the back of Google's spine.

Walking Palm and Agave tree trade

Another nature oriented trade was inspired by the Walking Palm and Agave tree which appear in the deep amazonian jungle and the high Andean high jungle. The principle of propagation is similar but the pattern may be different. The walking palm has many long roots that stick up about 1/3 the way up its tall thin trunk in to the soft wet mossy ground of the jungle. As the top of the tree leans one way or the other to seek light seeping through the high canopy the roots on the far side let go, and the new roots grow out to support in the direction of the tipping trunk allowing the tree to walk towards the light. Some quantification of the speed of this action,, the proportions, and movements and angles might give some ideas about the natural progression of price growth in the market as it seeks new light, new energy, new money in it progression an growth.

The Agave propagates from a short dense sharply pointed bush and the when its energy has built, it sends a long tall shoot up 3 or more ( need to count this) times the height of the bush. The shoot is covered with seed pods that tip the long tall shoot over and as the shoot tips over, the packs of multiple seed pods land some distance away from the parent bush and propagate new the plants and new shoots in time. My impression of the current market is like the Agave tree. It tipped over Friday today, but in due time, the new seeds should propagate and send up new growth Quantification might include measurement of the height of the stalk to the bush, the number and weight of the seeds, and the propagation rate to discern how such a similar phenomenon might manifest itself, if at all, in the markets with any regularity that way that nature seems to manifest such regularities.

Upward Drift

Many pleasant hours strolling with the family in the lush high jungle forest on a precipitous narrow trail overhanging on the side of thousand foot cliffs chipped out of solid rock by ancient hands leading to fantastic science fiction like looking ruins set atop high abutments above precipitous peaks, viewing vertiginous valleys and glacier capped peaks, waterfalls, fountains and streams gave time to think and consider the applicability of the upward drift to individual trades, individual traders, civilizations, species and evolution. Certainly there is upward drift in evolution and in civilizations. The question is how can the trader profit from this? The Inkas' had a large and glorious civilization, but not so great that it is now reduced to a mere set of rubble tourists see and the shadow of an empire lives off. The Spanish helped the fall, but the Spanish had their fall shortly thereafter. The British had their upward rise, but now have a shadow of their former glory and empire. Evolution of species drives upward betterment, but evolution itself is the story of extinction. Companies rise, but few of the Dow are the same as they were, or the Nifty Fifty. How is a trader to beat buy and hold with leverage? Study of the outliers, dips, crashes and valleys, extinction is a key. On the plane ride home, The Expert's tome on the subject will provide much more food for thought on the effect of, the reason for crashes, and outliers, and the various asymmetries in the analysis which will be covered in a subsequent post.

The Pace on the Trail

The Inka Trail rises and fall over many thousands of vertical meters over mountain passes on its journey to Machu Picchu. It eventually ends up lower than its start. The climbs are grueling cardio climbs that push the climber to the limit of sustainable heart and lung function. Each climber has an individual pace. The best advice is to follow your own individual pace. Too fast, and the climber starts to huff and puff, and pant and soon must stop losing progress. Fast runners, BMX'ers, and fighters know this. Too slow for some reason causes exhaustion or frustration as well. A group of English tourists walked too briskly, then starting to pant, had to stop too often to rest and catch their breath. For this trekker a very slow but steady pace allowed an equal or better overall progress. Some groups felt the need to walk together, but the varying capacities of the individual members created tension, and progress overall slower than splitting into individual paces with set rendezvous points. It can feel really ridiculous to step, take two breaths and step, but arriving at the end of the trail feeling strong and whole is the ultimate reward for the tortoise.

Each trader has a pace at which he performs most comfortably, which should be considered and which will allow the best overall performance. It is the heart of the tortoise and hare parable. The life of an investor and trader should be long, a lifetime properly. There should be consideration of pace in the traders vocabulary. The idea is not completely captured in risk tolerance or return and encompasses a longer term view of the journey.

more later…


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