I was going to drop this into the email of the week category but it seemed to be more of a sook of the week sort of thing. Unfortunately, this one wasn’t sent to me so I had to read it over LB’s shoulder but its contents are more than worthy pf repeating. Our erstwhile correspondent stated that the had some success in the market but really was an overall loser. The reason he was a loser was because the markets were rigged by giant hedge funds who were set up to steal of ordinary investors and the somewhat sharp move down on Wednesday was proof of this. He didn’t see any way to be profitable other than to understand price action (WTF) so was quitting.
This email also dovetails neatly into a discussion we have been having on the Mentor Program Forum which had drifted into the nature of personal responsibility and its role in achievement. My view is that people who are successful at whatever they do have an internal locus of control and their actions and vocabulary reflect this. For example saying “I can’t” places the locus of control outside of your sphere of influence. Whereas, saying “I won’t” reflects an internal locus of control – you are simply admitting that you won’t do something and this is very confronting for people. For example when people say they cant lose weight, what they are really saying is I wont but they dont want to admit this. Their failing has to be the result of some external agency such as a mythical metabolic condition.
Stating that the market is rigged is no different since it places control in the hands of an unseen external agent and therefore away from the individual. The individual is therefore automatically resolved and all responsibility for their failings. By default they have adopted an I cant mentality.
Over the years I have seen this repeatedly – traders find out that the markets are not an instant ticket to massive wealth and therefore give up. In many ways though this is no different to the tin foil hat wearers of the world who see conspiracies everywhere. Research into conspiracy theories by Joseph E. Uscinski and Joseph M. Parent and presented in their 2014 book American Conspiracy Theories (Oxford University Press) found that –
“researchers have found that inducing anxiety or loss of control triggers respondents to see nonexistent patterns and evoke conspiratorial explanations” and that in the real world “there is evidence that disasters (e.g., earthquakes) and other high-stress situations (e.g., job uncertainty) prompt people to concoct, embrace, and repeat conspiracy theories.”
I would see losing money in the market is an anxiety inducing event. However, my feeling about why poor traders react this way does drift back to a very uncharitable point of view. They simply cannot do it and are therefore looking for someone else to blame for their failings. To me it is no different to football fans who blame the referee for their teams weekend defeat. You are not good enough – man up and admit it.
Notwithstanding our authors obvious lack of moral fibre there is another issue within their email that bears closer scrutiny and that is the notion that the move on Wednesday was somehow an outlier that could have only occurred because of market manipulation. Consider the chart below on which I have marked a series of moves with red and blue circles.
The immediate question I would pose is how is the move in red different from those in blue? Other than it being a bearish move and the others bullish there is no different, nor is it different from any of the other nasty down days that the market has experienced. I can only posit that this move was different from our authors perspective because it caused our author to lose money because he was caught in an expectation that price only ever goes up and if price goes down when I am expecting it to go up then the market must be rigged. It has to be rigged because I am not stupid enough to be on the wrong side of a move. Again, the notion of failure is caused by an external event not an internal inadequacy. We are back to our I wont versus i cant distinction.
However, the recent price action of the market does bear closer examination to see whether this move is an outlier worthy of tagging as the sign of collusion among unseen agents. the chart above shows the recent support/resistance lines in the market. It shows that for some time the market has simply been bouncing around doing very little. It may have an extreme up day or it may have an extreme down day but in the overall scheme of things it has not gone very far. If the market was being savagely manipulated then it would show short term performance that was divergent from other markets in the world. If we look at the performance of a handful of other markets over the past three months we see that this is not true. Since late April world markets have been very ordinary.
If we expand out the time horizon to five years we can see that the local market has been a consistent underperformer – this is simply the nature of the market at present.
It is difficult for people who are unsuccessful at something to admit that they are unsuccessful, it is far easier to blame someone else for your failings. To do so is in many ways the default setting for the bulk of the population. Failing is a natural state of being for all of us – we all fail at something at some point in our lives. But very few have the courage to admit that their failings are the result of internal shortcomings in either skill or emotional maturity.
I will leave the final words to LB’s seven year daughter who seems to be the fountain of all wisdom as most kids are. LB was telling a very heartfelt story of a time in her life at school when one of her friends offered her support in a time of need. She had set the scene and was just about to deliver the wisdom that her friend had imparted, in the manner of a parent offering an important life lesson when her daughter pops up and yells…he said suck it up ya big baby…..