Current Affairs

  • Coping, and the Scary Times Success Manual

    With the markets making new lows and volatility shaking
    investors out and in both directions, I thought this would be a good time to
    talk about coping with loss.

    There are predictable stages in coping with loss. In general you can expect to
    go through anger, denial, bargaining,
    despair, and finally acceptance. The stages of
    grief are normal and to be expected.  Here is a link to a more detailed
    article about the stages of loss process    .

    Thought Patterns:

    The past few weeks have been brutal. Many people I talked to recently are
    suffering from "I should have …", or "if I
    would have     …", or "if I could have …"
    thoughts. What do I mean?  For example,  I might think that things
    would be better:

    • if I would have flattened
      exposure before the bail-out vote, or
    • if I could have held that short a little longer.

    The
    problem is that thoughts like those cannot affect the past.  They only
    create more stress and distraction.  They are a lens focused on loss,
    difficulties, past events, things that are missing, and what you don't want.
    Think of them as an unhealthy reflex that wastes energy, confidence and time.

    Instead the goal is to move forward and feel better.  What follows is a
    good head-start.

    From time to time, economic and political events make people anxious and
    fearful about their futures. This is one of those times.  In response to
    requests from their clients for insight on how to thrive when events seem to be
    beyond their control, Strategic Coach offers ten
    strategies for transforming negativity and unpredictability into opportunities
    for growth, progress, and achievement.

    They call it the "Scary Times Success Manual", and what follows are
    some excerpts.  The link to the complete version is below.

    Forget about your difficulties, focus on your progress.
    Because of some changes, things may not be as easy as they once were. New
    difficulties can either defeat you or reveal new strengths. Your body's muscles
    always get stronger from working against resistance. The same is true for the
    "muscles" in your mind, your spirit, and your character. Treat this
    whole period of challenge as a time when you can make your greatest progress as
    a human being.

    Forget about events, focus on your responses.
    When things are going well, many people think they are actually in control of
    events. That's why they feel so defeated and depressed when things turn bad.
    They think they've lost some fundamental ability. The most consistently
    successful people in the world know they can't control events – but continually
    work toward greater control over their creative responses to events. Any period
    when things are uncertain is an excellent time to focus all of your attention
    and energies on being creatively responsive to all of the unpredictable events
    that lie ahead.

    Forget about what's missing, focus on what's available.
    When things change for the worse, many desirable resources are inevitably
    missing – including information, knowledge, tools, systems, personnel, and
    capabilities. These deficiencies can paralyze many people, who believe they
    can't make decisions and take action. A strategic response is to take advantage
    of every resource that is immediately available in order to achieve as many
    small results and make as much daily progress as possible. Work with every
    resource and opportunity at hand, and your confidence will continually grow.

    Forget about your complaints, focus on your gratitude.
    When times get tough, everyone has to make a fundamental decision: to complain
    or to be grateful. In an environment where negative sentiment is rampant, the
    consequences of this decision are much greater. Complaining only attracts
    negative thoughts and people. Gratitude, on the other hand, creates the
    opportunity for the best thinking, actions, and results to emerge. Focus on
    everything that you are grateful for, communicate this, and open yourself each
    day to the best possible consequences.

    Click here to listen to Dan Sullivan
    present all ten "Scary Times" strategies    .
    Click here to download MP3 files or Click here to download a PDF version.

  • Coping, and the Scary Times Success Manual

    With the markets making new lows and volatility shaking
    investors out and in both directions, I thought this would be a good time to
    talk about coping with loss.

    There are predictable stages in coping with loss. In general you can expect to
    go through anger, denial, bargaining,
    despair, and finally acceptance. The stages of
    grief are normal and to be expected.  Here is a link to a more detailed
    article about the stages of loss process    .

    Thought Patterns:

    The past few weeks have been brutal. Many people I talked to recently are
    suffering from "I should have …", or "if I
    would have     …", or "if I could have …"
    thoughts. What do I mean?  For example,  I might think that things
    would be better:

    • if I would have flattened
      exposure before the bail-out vote, or
    • if I could have held that short a little longer.

    The
    problem is that thoughts like those cannot affect the past.  They only
    create more stress and distraction.  They are a lens focused on loss,
    difficulties, past events, things that are missing, and what you don't want.
    Think of them as an unhealthy reflex that wastes energy, confidence and time.

    Instead the goal is to move forward and feel better.  What follows is a
    good head-start.

    From time to time, economic and political events make people anxious and
    fearful about their futures. This is one of those times.  In response to
    requests from their clients for insight on how to thrive when events seem to be
    beyond their control, Strategic Coach offers ten
    strategies for transforming negativity and unpredictability into opportunities
    for growth, progress, and achievement.

    They call it the "Scary Times Success Manual", and what follows are
    some excerpts.  The link to the complete version is below.

    Forget about your difficulties, focus on your progress.
    Because of some changes, things may not be as easy as they once were. New
    difficulties can either defeat you or reveal new strengths. Your body's muscles
    always get stronger from working against resistance. The same is true for the
    "muscles" in your mind, your spirit, and your character. Treat this
    whole period of challenge as a time when you can make your greatest progress as
    a human being.

    Forget about events, focus on your responses.
    When things are going well, many people think they are actually in control of
    events. That's why they feel so defeated and depressed when things turn bad.
    They think they've lost some fundamental ability. The most consistently
    successful people in the world know they can't control events – but continually
    work toward greater control over their creative responses to events. Any period
    when things are uncertain is an excellent time to focus all of your attention
    and energies on being creatively responsive to all of the unpredictable events
    that lie ahead.

    Forget about what's missing, focus on what's available.
    When things change for the worse, many desirable resources are inevitably
    missing – including information, knowledge, tools, systems, personnel, and
    capabilities. These deficiencies can paralyze many people, who believe they
    can't make decisions and take action. A strategic response is to take advantage
    of every resource that is immediately available in order to achieve as many
    small results and make as much daily progress as possible. Work with every
    resource and opportunity at hand, and your confidence will continually grow.

    Forget about your complaints, focus on your gratitude.
    When times get tough, everyone has to make a fundamental decision: to complain
    or to be grateful. In an environment where negative sentiment is rampant, the
    consequences of this decision are much greater. Complaining only attracts
    negative thoughts and people. Gratitude, on the other hand, creates the
    opportunity for the best thinking, actions, and results to emerge. Focus on
    everything that you are grateful for, communicate this, and open yourself each
    day to the best possible consequences.

    Click here to listen to Dan Sullivan
    present all ten "Scary Times" strategies    .
    Click here to download MP3 files or Click here to download a PDF version.

  • If We Have “Economic Allies”, Who are our “Economic Enemies”?

    Butterfly_blue2
    Have you noticed how correlated and coordinated actions have
    been worldwide throughout this crisis? The concept of economic allies
    presupposes that we also have economic enemies. It's easy to construct
    a theory that countries like Russia and China are using financial
    markets to exert leverage in a nascent form of economic warfare.

    It is
    also easy to construct a theory that says that we are the enemy
    ourselves. That human nature's fear and greed instincts and reflexes
    almost inevitably spiral into a cavalcade of horrors.

    The butterfly effect theorizes that a butterfly
    flapping its wings in Beijing on one day can create or affect a rainstorm over
    Chicago a few days later.

    Likewise in a world where there is so much global
    communication, and where automatic trading programs can respond to each other from anywhere on the globe, it's no wonder that market moves are
    getting bigger, faster, and more volatile.

    Perhaps governments are cooperating and collaborating because of a collective recognition that a new form of
    protection is needed to dampen the increasing speed, size and leverage behind
    market moves?

  • If We Have “Economic Allies”, Who are our “Economic Enemies”?

    Butterfly_blue2
    Have you noticed how correlated and coordinated actions have
    been worldwide throughout this crisis? The concept of economic allies
    presupposes that we also have economic enemies. It's easy to construct
    a theory that countries like Russia and China are using financial
    markets to exert leverage in a nascent form of economic warfare.

    It is
    also easy to construct a theory that says that we are the enemy
    ourselves. That human nature's fear and greed instincts and reflexes
    almost inevitably spiral into a cavalcade of horrors.

    The butterfly effect theorizes that a butterfly
    flapping its wings in Beijing on one day can create or affect a rainstorm over
    Chicago a few days later.

    Likewise in a world where there is so much global
    communication, and where automatic trading programs can respond to each other from anywhere on the globe, it's no wonder that market moves are
    getting bigger, faster, and more volatile.

    Perhaps governments are cooperating and collaborating because of a collective recognition that a new form of
    protection is needed to dampen the increasing speed, size and leverage behind
    market moves?

  • Weekly Commentary through September 26th, 2008

    This was a tough week for the markets. Strangely, it might soon prove to have been a good week for the markets as well.

    So what is it going to take for the markets to finally bounce?  History shows
    that most intermediate or long-term bottoms are characterized by panic
    selling, hopelessness, and people simply giving-up.  If that is the standard, then we may be close.

    Here is some of the evidence of the fear, uncertainty, doubt that often accompanies bottoms:

    • This week reversed most gains from the prior week's rally and short-squeeze.
    • The markets continue to flirt with lows for the year. 
    • Because of the volatility and gaps, trading simply hasn't been normal recently. 
    • The economy and the markets dominate news and popular culture. 
    • This week, the President of the United States basically said that
      if a radical bail-out wasn't done, right now, it would damage our
      economy – and many others across the globe. 

    However, as bad as the markets did last week, they held up
    reasonably well considering how much bad news there has been and how
    close to the edge things really were (or are). Also, while markets went
    down, it was on lower volume than last week, and we didn't break last
    week's low. 

    The Calm After the Storm.  It's
    also probably worth noting that, historically, periods of great
    volatility are often followed by periods of much less volatility.

    With that in mind, I do believe that the government will reach a
    reasonable compromise to end the "Deal – or No Deal" situation very
    quickly. It's also likely that this agreement and the liquidity that it
    brings will give the markets some room to breathe and some fuel for a
    meaningful rally.

    On the other hand, there is a long way to go
    from here to recovery. Some people see this as the end of the crisis.
    At best, I see this as the end of the first step on the road to
    recovery.

    You Can't Bounce Until you Hit Bottom. 
    There are many corollaries in nature. This troubling time created a
    clearing. Much of the fear, uncertainty, doubt, and baggage from past
    mistakes are being wiped away. Firms are closing, the landscape is
    changing, Wall Street and our economy will literally never be the same
    again. And, yet, this kind of clearing is often the catalyst to new
    beginnings and fast growth.

    Noise Reduction. 
    When creating automated trading systems, one of the things that becomes
    increasingly important is to recognize the difference between signal
    and noise. Right now, there's a lot of noise. The markets, market
    players, and even governments are spooked. Under those circumstances,
    it doesn't take much to stir things up.

    The bailout and worldwide
    cooperation can be looked at as noise reduction. Temporarily, there
    will be a forced and tenuous peace. The hope is that as things calm
    down, people will make decisions from a stronger position (or at least
    from a position that's less fearful than where they are now).

    Remember, a journey of a thousand miles begins with one step.  Here's to progress.

  • Weekly Commentary through September 26th, 2008

    This was a tough week for the markets. Strangely, it might soon prove to have been a good week for the markets as well.

    So what is it going to take for the markets to finally bounce?  History shows
    that most intermediate or long-term bottoms are characterized by panic
    selling, hopelessness, and people simply giving-up.  If that is the standard, then we may be close.

    Here is some of the evidence of the fear, uncertainty, doubt that often accompanies bottoms:

    • This week reversed most gains from the prior week's rally and short-squeeze.
    • The markets continue to flirt with lows for the year. 
    • Because of the volatility and gaps, trading simply hasn't been normal recently. 
    • The economy and the markets dominate news and popular culture. 
    • This week, the President of the United States basically said that
      if a radical bail-out wasn't done, right now, it would damage our
      economy – and many others across the globe. 

    However, as bad as the markets did last week, they held up
    reasonably well considering how much bad news there has been and how
    close to the edge things really were (or are). Also, while markets went
    down, it was on lower volume than last week, and we didn't break last
    week's low. 

    The Calm After the Storm.  It's
    also probably worth noting that, historically, periods of great
    volatility are often followed by periods of much less volatility.

    With that in mind, I do believe that the government will reach a
    reasonable compromise to end the "Deal – or No Deal" situation very
    quickly. It's also likely that this agreement and the liquidity that it
    brings will give the markets some room to breathe and some fuel for a
    meaningful rally.

    On the other hand, there is a long way to go
    from here to recovery. Some people see this as the end of the crisis.
    At best, I see this as the end of the first step on the road to
    recovery.

    You Can't Bounce Until you Hit Bottom. 
    There are many corollaries in nature. This troubling time created a
    clearing. Much of the fear, uncertainty, doubt, and baggage from past
    mistakes are being wiped away. Firms are closing, the landscape is
    changing, Wall Street and our economy will literally never be the same
    again. And, yet, this kind of clearing is often the catalyst to new
    beginnings and fast growth.

    Noise Reduction. 
    When creating automated trading systems, one of the things that becomes
    increasingly important is to recognize the difference between signal
    and noise. Right now, there's a lot of noise. The markets, market
    players, and even governments are spooked. Under those circumstances,
    it doesn't take much to stir things up.

    The bailout and worldwide
    cooperation can be looked at as noise reduction. Temporarily, there
    will be a forced and tenuous peace. The hope is that as things calm
    down, people will make decisions from a stronger position (or at least
    from a position that's less fearful than where they are now).

    Remember, a journey of a thousand miles begins with one step.  Here's to progress.

  • Weekly Commentary through September 12th, 2008

    Volatility has been much higher than normal.  For example, the S&P 500 index rose or fell by more than 2% on five of the nine trading days so far this month.  There were only six such days during the last 4½-year bull run.

    Yet, for all that violent flip-flopping and massive gaps in both directions, the stock market ended last week essentially flat.

    We are back near the lows for the year.  Bears had a great opportunity to plunge through important psychological levels. Everything turned red for the ride down; and then the market reversed again. Part of me wonders whether short-sellers didn't press their luck because they "fear" another Sunday bail-out (in some form or fashion).

    The big news this week was about the fall of Lehman.  Here is a simple chart showing what happened to their stock this year.

    080912 LEH ChartAs I write this, it looks like Lehman is filing for bankruptcy and that Merrill Lynch is getting sold to Bank of America.  Futures are down.

    However, a big, quick, move down – here – might be the best thing to hope for if you are bull.

    Here are a few of the posts I found interesting this week:

    And, a little bit extra:

    • Sweet Dreams in Hard Times Add to Lottery Sales (NYTimes)
    • Niederhoffer's Ten Principles of Cricket and Market Power (Daily Speculations)
    • Wisconsin man eats 23,000 Big Macs since 1972 (Chicago Tribune)
    • Lehman Replaces Palin as Wikipedia Plaything (Infectious Greed 1 and 2)
    • McCain leading Obama in prediction markets and polls (Kudlow, RealClearPolitics)
    • Retailers Using Software to Increase Sales and "motivate" employees (WSJ)
    • Has the large Hadron Collider destroyed the world yet? (Click)
    • Biologists on the verge of creating a new form of "life" (Wired)

  • Weekly Commentary through September 12th, 2008

    Volatility has been much higher than normal.  For example, the S&P 500 index rose or fell by more than 2% on five of the nine trading days so far this month.  There were only six such days during the last 4½-year bull run.

    Yet, for all that violent flip-flopping and massive gaps in both directions, the stock market ended last week essentially flat.

    We are back near the lows for the year.  Bears had a great opportunity to plunge through important psychological levels. Everything turned red for the ride down; and then the market reversed again. Part of me wonders whether short-sellers didn't press their luck because they "fear" another Sunday bail-out (in some form or fashion).

    The big news this week was about the fall of Lehman.  Here is a simple chart showing what happened to their stock this year.

    080912 LEH ChartAs I write this, it looks like Lehman is filing for bankruptcy and that Merrill Lynch is getting sold to Bank of America.  Futures are down.

    However, a big, quick, move down – here – might be the best thing to hope for if you are bull.

    Here are a few of the posts I found interesting this week:

    And, a little bit extra:

    • Sweet Dreams in Hard Times Add to Lottery Sales (NYTimes)
    • Niederhoffer's Ten Principles of Cricket and Market Power (Daily Speculations)
    • Wisconsin man eats 23,000 Big Macs since 1972 (Chicago Tribune)
    • Lehman Replaces Palin as Wikipedia Plaything (Infectious Greed 1 and 2)
    • McCain leading Obama in prediction markets and polls (Kudlow, RealClearPolitics)
    • Retailers Using Software to Increase Sales and "motivate" employees (WSJ)
    • Has the large Hadron Collider destroyed the world yet? (Click)
    • Biologists on the verge of creating a new form of "life" (Wired)

  • Tough Week?

    Last week I wrote that trading is often stressful; and learning how to handle the emotional and physiological response patterns is an important step toward long-term success.


    This week the markets were at their manic-depressive best, which can be tough for traders.  Investors were like hyperactive first graders playing musical chairs.


    Here are some funny videos of how some people handle their tough week.


    The first video shows a man beating his computer.  There is something primal about it that makes it memorable.  I saw this many years ago.  Yet I find myself thinking about this one from time-to-time.  So, I put it first.





    Here is the direct link.


    I saw this one on on the Huffington Post.  It has a lot going on; way too much to describe.  It is more fun to just watch, anyway.





    Here is the direct link.


    Finally, this one shows a man in a coffee shop freaking-out after his computer hangs, apparently he has a presentation to give in ten-minutes, so getting arrested seemed like a good idea.





    Here is the direct link.  (Hat-Tip to Gelflog)

  • Tough Week?

    Last week I wrote that trading is often stressful; and learning how to handle the emotional and physiological response patterns is an important step toward long-term success.


    This week the markets were at their manic-depressive best, which can be tough for traders.  Investors were like hyperactive first graders playing musical chairs.


    Here are some funny videos of how some people handle their tough week.


    The first video shows a man beating his computer.  There is something primal about it that makes it memorable.  I saw this many years ago.  Yet I find myself thinking about this one from time-to-time.  So, I put it first.





    Here is the direct link.


    I saw this one on on the Huffington Post.  It has a lot going on; way too much to describe.  It is more fun to just watch, anyway.





    Here is the direct link.


    Finally, this one shows a man in a coffee shop freaking-out after his computer hangs, apparently he has a presentation to give in ten-minutes, so getting arrested seemed like a good idea.





    Here is the direct link.  (Hat-Tip to Gelflog)