Does this explain a lot of the posts on ET?

Discussion in 'Psychology' started by patch227, Feb 1, 2006.

  1. On the first day of my Abnormal Psychology class many years ago, the professor asked "Can anyone describe NORMAL?". Of course, no one could.

    I do not know if CONTROL is the right word. We definitely must learn to take responsibility for our decisions. We can decide to drink - smoke or not, which may affect longevity. However, eventually we die, which we have no control over.

    Perception is interesting. When I first started trading using live data, the charts looked like a jumbled mess with no rhyme or reason to the ups and downs of the market. Over the years learning to apply correlations between market breath of the cash market and the futures price movements, I now can anticipate market reactions to information at my disposal. What was once chaos is now organization.

    However, this takes time to develop by observation, study and some calculation.

    #21     Feb 2, 2006
  2. zdreg


  3. Your use of the word "other" implicitly suggests that you believe you have a brilliant mind as well. Good luck with that.
    #23     Feb 2, 2006
  4. zdreg


    don't discourage the lad. how can one make money except off somebodyelse's hubris:)
    #24     Feb 2, 2006
  5. Hubris doesn't cause trading losses: stubbornness and laziness do. One can be proud and still admit mistakes; it's stubborn traders who can't take losses. Proud traders can still do all their homework regardless of how good they think are; it's lazy traders who miss things.
    #25     Feb 2, 2006
  6. I don't think that John Meriwether of LTCM was lazy. But he was a huge ego. I think that false pride and stubbornness are fairly closely linked in the trading game.
    #26     Feb 2, 2006
  7. Merriweather is an example of bad manager not a bad trader: Merriweather raised cash and both hired and managed traders but didn't do the trading himself. Merriweather didn't have the mathematics background to even begin to create and code LTCM's trading models; that's why he hired lots of quants. LTCM's blowup had less to do with hubris and a lot more to do with quants' assumption of lognormal commodity price distributions. Quants also often don't grasp the practical side of trading: LTCM's quants buying most of the Russian country debt; and Metallgesellschaft's quants' confusing crude futures contracts with crude forward contracts.
    #27     Feb 2, 2006
  8. hans37


    I'm not convinced being a genius in and of itself is an asset in trading.
    #28     Feb 2, 2006
  9. Actually, if you read Lowenstein's book, you will find that even one of the academics (I don't remember which one, but I think it was Merton) was no longer comfortable with the model at one point, but Meriwether kept betting on reversion and continued to "double down" into oblivion. As I understand it, Meriwether was a key participant in the sinking of that ship because of his misplaced and unyielding belief in the model and his ability to exploit it.

    "IF THERE WAS one article of faith that John Meriwether discovered at Salomon Brothers, it was to ride your losses until they turned into gains..."
    #29     Feb 2, 2006
  10. This exchange between me and Thunderdog helps me clarify my thinking.

    Journalists--like Lowenstein-- usually show little understanding of commodity price moves or discretion in choosing sources. Even DJ staff writers quote floor brokers and runners for price move "reasons". Learn to distinguish between primary and secondary information sources: Lowenstein is, at best, a secondary source. Also, it's highly unlikely Merton accused Merriweather of "sinking the ship": such talk violates LTCM's partnership agreement and also is libellous. Be careful to distinguish between Lowenstein's opinions or speculations and facts or actors' statements. I wouldn't bother reading Lowenstein's narrative of LTCM's collapse; frankly, Lowenstein doesn't know much about LTCM and also isn't qualified to interpret either events or data.

    You used the word "unyielding" to--in your words--describe merriweather. "Unyielding" is nearly synonymous with "stubborn" but not close to "proud".
    #30     Feb 2, 2006