Ben Graham got it wrong. It’s not Mr. Market. The market is a ♀, female. A sexy, borderline personality disorder, tornado of emotions. Incapable of long-term planning, living in the present. A Beautiful Disaster. Ben Graham et cetera say that in the short term, the market is a voting machine. That would be too simple. It’s a highly volatile, disorderly, driven-by liquidity demand, perception machine. I digress, a topic for another post. Let’s talk about estrogen.
What do women have to do with the market, you ask? Everything, I say. Understand the behavior of females, understand the behavior of the stock market. Notice I said the behavior, not words. If you think that females are in any way rational, caring realists, you’re wrong. I like to call this the Caring Woman Hypothesis (CWH for short). CWH, like the Efficient Market Hypothesis, EMH, is a rational fantasy. Nice in theory, but doesn’t work in practice. You catch her stealing, she won’t confess. Meet Virginia. Nerds, both in finance and romance, like equations. If I do X for her, she will give me Y. If bonds go up, stocks go down. Behind this illusion lies loosely controlled chaos. It doesn’t surprise me that they are stuck teaching “how the stock market works,” rather than showing us. Or that they have fat, ugly wives. This is why nerds are not good with women. I am the Professor’s Broken Heart.
Women are manipulative and scheming self-rationalizing machines. To survive, they had to be and still are. Study evolutionary biology and see the light. The incongruity between what a woman says, and what she does, this inverse nature is the key to understanding both them and the stock market. This is why she calls, because she hates you. This is why stocks are Papier–mâchés of shit and go parabolic. The Costanza Effect. Unintended Consequences. Figure it out. Women don’t know the extent of their own cognitive dissonance, so please, for the sake of your future illegitimate children, don’t speak to them of these things. Women say they want a gentleman provider of caring disposition. This is the small part of their rational mind speaking, and it’s true to a certain extent. The problem is – women are also of a sexual nature. They need two things: Emotional Security and Sexual Excitement, and when something down under tingles, all else is thrown aside to live in the moment. That’s when their self-rationalizing mechanism kicks in. My girlfriend is different! Every guys says that. Short-term, it’s all about sex. In the stock market, the short-term is volatile and unpredictable, like sex. Long-term, it’s about security and stability, like marriage. Stock market – cash flows, survival, and macro. Watch the movie Blue Valentine, and cry for the guy. I did.
View the market through a woman’s lens. What she says, isn’t what she wants, and what she wants, is for you to decide. If nothing else, this will make or break the trader. Buffett always said temperament is the key to investing, and I believe it. The “inverse nature of.” If in doubt, stay out. If certain, all out, with an out. All else fails, always against. Apple just had a record quarter? The retail trader is buying. The Professional is thinking. As Niederhoffer said in The Education of a Speculator, “Better to go against. What looks good today is encapsulated by the market tomorrow and will change the expected profits, the probabilities, and the path of least resistance in subsequent periods.”
Women are often characterized as “emotional.” Emotions, for all their heartache, have been one of my best indicators. Soros got backaches, but I’ve found the inverse nature in my physical manifestations as well. When I feel a gut-wrenching hurricane in my stomach, I’m buying. To be so petrified, so scared of loss, this is the perfect inverse indicator to go long. When I feel like I’m drunk on puppy love, wanting to skip in the flowery fields of optimism, that’s when I need short exposure. Really, it comes down to this. If you’re not uncomfortable in a trade, you’re doing it wrong. If there’s not some level of discomfort in a relationship, it’s as good as dead. Comfort is the death of the speculator. And relationships.
Dissonance is the Name Of The Game. Women are the Representation. More on this at a later date.