Have you ever been shocked by your own behavior?

That’s how Robert Sapolsky begins his book “Behave”.

“No”, I thought, before I realized you were supposed to say “yes” and thus be enticed to read the book to find out why humans do things they can’t explain or feel ashamed of.

I just don’t see it. Why would you do things that shock yourself?

Pull the trigger if you want to. Go to the gym if it’s good for you. Party if you like, but don’t do it if you feel bad afterward — that is, bad-er than you expected.

HOW DO YOU TRADE?

Talk about being shocked, some stock traders surprise themelves – and me – again and again, when they keep trading on emotional impulse during reporting season instead of according to set parameters within a proven strategy. If you were that guy or girl the last four weeks, don’t be in April.

I hope this doesn’t come as a shock to you, but since daytraders create exactly zero value (negative even, due to the false liquidity they provide, and the exaggerated price swings they cause as they react to other people’s moves), a trader without a superior strategy will lose money over time. That’s before commission and fees.

In the corporate world, profit is of course created by providing goods and services to the client that have a higher value than they cost to produce. A daytrader is only trying to do one better than his or hers counterparty. It’s a zero sum game less commission for them, and a negative for the market and society in general. The more people engaging in non-research based trading the less real products and services are made available, and the poorer the society.

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Completely off topic, I caught the song Bloodline when partying about a week ago, and I just had to listen to it A LOT OF times.

However, when a song is that good and instantly catchy, it’s almost bound to fall out of favor just as quickly. Not completely unlike the current stock market rally for cyclicals, based on explosive credit in China and The Fed’s sudden dovish U-turn. Well, with the best start to the stock market in 30 years behind us, you know it’s not time to buy shares.

On the other hand, gold is really picking up some speed, despite s strong dollar and a stock market rally. I’m happily holding on to all my types of gold, including Nueva Granada and Gran Colombia. If you’re Swedish, you really should listen to my and Anna’s talk with gold and precious metals investor extraordinaire Eric Strand here.

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2 Comments

  1. Isn’t commodities trading also a zero sum game?

    Driving up the price of gold may cause whatever remains in the ground to be removed sooner than later, but I don’t see any value in this. Negative, even, because it takes resources to mine it.

    Agriculture processes are already committed long before speculation determines the final price of their output. Maybe the market, in the long run, drives resources from less demanded products to more highly demanded ones, but wouldn’t this happen anyway?

    What about the speculation in petroleum? Does it really affect the amount produced, or does it just drive up the price of gasoline erratically?

    If I were a gambler, I’d be suspicious of gold. It is a popular traditional safe haven, therefore its worth as a hedge against the impending U.S. bankruptcy is /already priced in/. Betting with the herd isn’t likely to have much upside.

  2. In the variable quattro stagioni, after a negative year you recommend the stock part to be increased with 15%. But what would you decrease? Bond, gold or commodities? Or all three?

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