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Focus & Discipline

  
  Education
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The stock market is always one step ahead of you. The sooner you accept this fact, the better for your trading results. It helps to think of the market like the rabbit on the rail at the greyhound racetrack. As an investor, you should never mistake yourself for the rabbit or else the market will have to humble you and remind you that you are just a dog. The best you can expect to be is a greyhound in close pursuit, tethered to this market rabbit by an invisible rope. The fact is that the market rabbit is not really in the race. You are racing your fellow greyhounds. They are the ones whom you want to stay out in front of.

The questions you should ask are twofold. The first question is how to stay tethered to this rabbit. The second question is how closely tethered you actually want to be. Candidly answering the first may result in your answering the second by default. So focus on the first question and then ask yourself this: what you are willing to do each day to maintain your connection to the market? Your personal daily circumstances as well as your emotional commitment and discipline should guide you to generate a reasonable answer. With those inputs, you can then decide whether you allocate 30 minutes a day or 30 minutes a week. (more…)

The Good Psychopath’s Guide to Success-Dutton & McNab :Book Review

  
  Education
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the goodAccording to a controversial 2011 study by researchers at the University of St. Gallen, traders are more reckless and more manipulative than psychopaths. The traders in the study were intent on getting more than their opponents; in fact, “they spent a lot of energy trying to damage their opponents.” They behaved as though their neighbor had the same car, “and they took after it with a baseball bat so they could look better themselves.”

I suppose Kevin Dutton and Andy McNab would characterize these traders as bad psychopaths. They possess some character traits that could propel them to great profits, but if left unchecked these traits may lead to financial implosion instead.

The Good Psychopath’s Guide to Success: How to use your inner psychopath to get the most out of life (Apostrophe Books, 2014) is co-authored by a (good) psychopath and a psychologist. McNab is an SAS (British Special Air Service) legend who, as he himself claims, is “considered to be one of the top thirty writers of all time”—I assume by someone whose education was tragically cut short. Dutton, a research fellow at Oxford, has spent a lifetime studying psychopaths. The book, reflecting the penchants of the authors, illustrates self-help principles with rough and tumble adventure tales.

A psychopath has a distinct subset of personality characteristics, including ruthlessness, fearlessness, impulsivity, self-confidence, focus, coolness under pressure, mental toughness, charm, charisma, reduced empathy, and a lack of conscience. Depending on how these traits are dialed up, down, or omitted, the psychopath can be either good or bad.

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Speculation has always been a part of the market and always will be.

  
  Education
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It was the spring of 1976. Investors were still licking their wounds from the severe bear market of 1973-74. Donaldson, Lufkin & Jenrette, an investment bank, was hosting a conference that matched two investing legends onstage at the same time — Ben Graham and Charles Ellis.

Ellis, moderating a Q&A, asked Graham why the mid-1970s were such a disaster in the stock market for most investors. Graham replied that, “most investment professionals, although possessing above average intelligence, lacked an overall understanding of common stocks.”

As told by Robert Hagstrom in his book Latticework: The New Investing, here’s where Ellis and Graham picked up after the conference:

After the seminar, Graham and Ellis spent some time together, and the conversation continued. The problem with our industry, Graham insisted, is not speculation per se; speculation has always been a part of the market and always will be. Our failure as professionals, he went on, is our continuing inability to distinguish between investment and speculation. If professionals can’t make that distinction, how can individuals investors? The greatest danger investors face, Graham warned, is acquiring speculative habits without realizing they have done so. Then they will end up with a speculator’s return — not a wise move for someone’s life savings. (more…)

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