May

14

An observation: Whether it be chess, table tennis, markets or whatever, people love to be on the attack and score quick victories that draw attention. I think it's an ego driven thing, the spectacular win helps people with their self image. Markets tend to go down faster than the go up, which makes the short the weapon of choice in this field. Chess players are forever wanting to emulate Mikhail Tal or Garry Kasparov and score quick victories, and table tennis players will play for winners regardless of the percentage they get in.

This would represent a systematic bias from humans in all fields plus a way of gaining an edge just about everywhere and anywhere. Find an egomaniac and do what they hate; defend instead of attack and play for the long game instead of a quick and spectacular win. Perhaps this equates to the chair's depiction of 'the house', but maybe it goes further?

Thoughts?

Jeff Watson writes: 

The ego thing is real, and I suspect but cannot prove that the quick victory would pay short money. Back in the pit days, the frenzied scalpers would be in the market a few seconds and a good scalp might be 3-4 ticks on a 10 lot. Meanwhile, the spreader would be watching their position, adding to and subtracting from, and in a few weeks might make 100 ticks on a 1500 lot. Nobody watched the spreader because the scalper was making all the noise and grabbing the attention. Sometimes in life and the markets, the tortoise beats the hare. Fading a big ego is a tried and true strategy as long as one picks their entry and exit points.
 

Brett Steenbarger writes: 

What a great point!

The desire for the short (and quick market move) also comes from inability to delay gratification (lack of patience and the need to be gratified right away).

It also comes from a compensatory mechanism, where people who missed a large up move now look for vindication with a large down move. It never fails that, after a large market rally (such as we've had the last couple of years), traders trot out "the 1987 analogue" and the specter of a grand correction. I've yet to see a 1987 analogue proponent who made large money in the preceding rally. I've also yet to see a true replay of 1987.

Finally, it is surprising how many money managers let their political predilections shape their investment views. Many viscerally dislike the current U.S. President and have been steadfastly bearish through his tenure. The worst outcome for them would not be an economic or geopolitical cataclysm, but events that truly would bring growth and prosperity. Ayn Rand has written insightfully about "sense of life", and you have long noted the destructive sense of life of the permabear.


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3 Comments so far

  1. Nikolas on May 15, 2018 11:48 am

    Great posts indeed (all of them).

    “Find an egomaniac and do what they hate; defend instead of attack and play for the long game instead of a quick and spectacular win.”

    In retrospect I believe this is absolutely true in poker. But I wasnt smart to figure it out and exploit this systematically or even in a conscious manner.

  2. bo keely on May 17, 2018 3:09 pm

    The greatest thrills for me in sport, school and survival have been the long haul victories. Quick wins are cotton candy, but well-planned and executed triumphs requiring perseverance stick to the bones.

  3. Tim Duggan on June 5, 2018 2:10 am

    “The symbol of all relationships among [rational] men, the moral symbol of respect for human beings, is the trader. We, who live by values, not by loot, are traders, both in matter and in spirit. A trader is a man who earns what he gets and does not give or take the undeserved. A trader does not ask to be paid for his failures, nor does he ask to be loved for his flaws. A trader does not squander his body as fodder or his soul as alms. Just as he does not give his work except in trade for material values, so he does not give the values of his spirit—his love, his friendship, his esteem—except in payment and in trade for human virtues, in payment for his own selfish pleasure, which he receives from men he can respect. The mystic parasites who have, throughout the ages, reviled the traders and held them in contempt, while honoring the beggars and the looters, have known the secret motive of their sneers: a trader is the entity they dread—a man of justice.” - Ayn Rand

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