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19-Sep-2006
Universal Principles, from Victor Niederhoffer

It is helpful to study universal principles so that all activities, including those related to the markets, BBQ and books can be fitted into a framework for proper decision making and understanding. The best universal principles I have found are in Hoagland's book, The Way Life Works, but they should be augmented by the study of universal principles in all fields ranging from ethics to the origin of life. This is important so that one does not blow like a leaf in the wind, and especially for those who are prone to "switches" as described by Bacon.

In studying a few of the 684,000 entries under Universal Principles on Google, I came across one set that was so important it is worth memorizing by market practitioners. These are the Four Universal Principles of Criminal Behavior contained in the UPCB, namely Ideation, Communication, Facilitation, and Actualization.

The principles are based on an actual robbery and involve getting the idea for the crime and fantasizing about it, communicating the idea to a partner through physical signals, facilitation of the crime through getting near the scene and gaining equipment to do the crime, and actualization, and doing the crime itself. The problem with this set of principles is that it is completely descriptive and nonpredictive, and almost everything anyone does could be forced into this model by a zealous bigot. I am reminded of Rose Wilder Lane's description in Liberty of the search of a neighborhood in Hungary for people without an I.D. card, and the smug self assurance that the Policeman had with their guns and night sticks. As the English Bobby observer said "Oh, that's great, but in England they would never go for that regrettably -- Every man's home is a castle and all that baloney."

Before making a move against you, the market likes to fantasize about it , by moving in the direction and back, just to test the waters, like going down much from open to low at the beginning of a day and then coming back, just to see how many prisoners they it take the next time. Or one small day down after seven up days, like today perhaps, just to test the waters. Then it must happen that the move is communicated to another market, first the Swedish market for example, then the German, then finally the Far East, all giving the strongest and the best capitalized a time to prepare for it and issue their margin calls. The facilitation occurs when the opening occurs the next day, and the trap is sprung, and the actualization is the move.

This important subject has many highways and byways, and I would seek your guidance as to universal principles for proper behavior in markets and life.

To read a previous post on Hoagland by Victor Niederhoffer.