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The Judas Goat and the Markets
The Judas goat combines the reprehensible characters of the apostle Judas Iscariot who, in the guise of a friend, sold out his master for 30 pieces of silver with the capricious and wily nature of the goat. It applies to an animal or person that is trained to lead sheep or cattle up the slaughtering ramp, exiting by a side gate to repeat the process. Goats are a particularly social animal and destructive of pasture land in the wild, and it is common for a special Judas Goat equipped with a radio tracking collar to be sent out in the wild to join his wild counterparts so that they can be located and exterminated.
Jack London, who seems to know much about investments, has a nice use of this well known tendency in White Fang. A female dog lives with wolves and is trained by the wolves to be particularly attractive to the dogs on a sled. She lures them to enjoy her affections and when the individual dogs find her attractions irresistible, they are quickly slaughtered by the pack.
"Look at that, Bill," Harry whispered. Full into the firelight with a stealthy sidelong movement glided a doglike animal. It moved with commingled mistrust and daring, cautiously observing the men, its attention fixed on the dogs. One Ear (one of Bill and Harry's remaining dogs) strained with eagerness. "It's a she wolf", Harry whispered back, "and that account for Fatty and Frog (two dogs that the she wolf led to slaughter). She's the decoy for the pack. She draws out the dog, an then all the rest pitches in an eats 'em up".
Yes, but, such a common contrivance in nature (see Letters from a Self Made Merchant to His Son for a similar story), must have counterparts in markets. I invite readers to add to the following list:
You get the idea. Give us more!
Peter Gardiner Offers:
...and on and on... too many and too pathetic to enumerate
From Joe Hughes:
One we will hear within the month of January: will be the Super Bowl AFC bearish, NFC bullish barometer. I can't remember the last time the NFC won, and if the Patriots can blow up a barometer, and you having lived in Boston during their puke awful days, must cringe when they bring this junk up. As if anything should've been a dead sell, flat out, end-of-the-world, going-to-zero barometer, it would've been the unlikely occurrence of the Pat's winning the Super Bowl. That's apocalyptic, (sp it's late) even more so than the Red Sox, White Sox or god forbid the cubs, who are tied to the goat.
A few from Kim Zussman:
Sell in May and go away (check what happened 5/05)
Januaries are best month (check what happened 5/05)
Santa Rally (check what happened 11/05)
Expert says buy VIX < 11 (check what happened to him)
J.T. offers his Favorite:
The best leader in the goat category for me is the very simple Vig/Spread/Grind lesson. It is so eloquently spoken of by Arthur Crump in "The Theory of Stock Speculation" via Nelson's Wall Street Library Vol. III (1900). Crump also uses so appropriately the words "decoy-duck" to explain the dilemma. Here is the paragraph from Chap. VII "Pitfalls".
"A broker, it may be said, should warn his client before putting him into a stock the price of which is wide; but unfortunately such warnings do not increase the number of commissions, and, apart from that, if a speculator does not take the trouble to inform himself accurately upon such a point, placing no reliance upon the advice of any one, he deserves to lose his money. Some markets are so small that a speculator once in, is what is called "roasted" before he is let out again. A particular man very often is the only dealer in the market in a certain stock of which perhaps the supply is also very limited. Under such circumstances a haphazard speculator who may chance to have observed some rather violent fluctuations thinks there is a good opportunity to make some money, and he sells a little bear a couple of thousand pounds nominal of stock. The round sum, and the channel through which the sale comes, helps the jobber to read the operation. The decoy-duck in the shape of the fluctuations in price, lures two or three more sportsmen on to the dangerous ground, and when they want to get out the price is put up against them, and they are quietly mulcted of 50 lbs. each, without a chance of getting even a sight off their enemy, or any value for their money but experience."
A Judas lesson from David Wren-Hardin:
The I Think I Know More Than I Do Goat. This goat entices someone with expert knowledge in a field to think that gives him an edge in valuing a company that uses that knowledge. As a new trader fresh from graduate school in biology, I eagerly bought Celera during the human genome sequencing race. After all, I could evaluate the science, and knew that they "had a good technique." I paid $200.00 a share, close enough to the top to be the same thing. This goat also led people enamored with their new Palm device to pile into that stock ("Look at me! I'm Peter Lynch, buying what I know!").
I learned my lesson after Celera, and rarely buy individual stocks. When people hear I'm a trader, they frequently ask me for my investment ideas. I quickly say I'm the worst investor I know, that I have 97%+ of my stuff indexed. Sure, I may trade thousands of shares a day, and can price some things to the penny. But fundamental analysis? Forget it.