Everybody gets what they want from the market... do you?

24th Jan '22 by Edward Croft

14 comments 1866 reads

I have been reading Luca Dellanna’s excellent little book “100 Truths You Will Learn Too Late” in which he creates a riff on the Serenity Prayer which really resonated with me:

May I have the honesty to acknowledge what is important for me, the wisdom to know its costs, and the discipline to pay them.

The best parts of the book are a slap in the face about everything you aren’t doing to achieve your goals and how you might be able to correct that. He describes how people are exceptionally good at succeeding at their priorities, but extremely dishonest about what those priorities really are.

This reminded me of a line in the first Market Wizards book where Ed Seykota, the legendary trend follower, stated “Win or lose, everybody gets what they want from the market.” When I first read this the market had undergone a correction and I was feeling particularly beaten up. I thought “this has to be nonsense?”* but the line really hit me hard and got me thinking.

Surely… everybody wants to win in the market. Everybody wants to beat the market. Doesn’t everybody want the same thing? But the more I thought about it, and reflected on the behaviours of myself and everyone else I knew, I realised that we can have a real dishonesty about what we really want from the market.

So what do people really want from the market?

Some people want to invest in the market, because that’s what everyone else does
Some people want to invest for good and feel good about themselves for doing so
Some people want to feel the thrills and spills of wild speculation
Some people want to make friends and companions
Some people want to look good to their bosses, friends or other halves
Some people want to have results without putting in the hard work of transforming their habits
Some people want to support company executives they like and believe in
Some people want to follow the stories of the shares they own wherever those stories go
Some people want to blame others if their investments go wrong so outsource their thinking to gurus
Some people want to prioritise sheltering their income or capital from tax
Some people want to pretend to themselves that paper losses aren’t real losses
Some people want to feel part of a tribe on a mission against the world
Some people…

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AnonymousUser1822519

24th Jan '22

Thanks for the book recommendation Ed. I've read a few of the rules in Amazon's preview of the book and bought it right away. I have over 500 hundred books in my kindle collection but I think already this is in my top ten. I believe that to be the best trader I can be, i have to be in the right headspace and some of these rules are truly lifechanging. Thanks.

epo001

Luca Dellanna looks worth researching but he has just written a book about the pandemic, which is worrying.

It seems to me that only a few (one?) of your bullet list items are actually about "investing". Most are about gambling, wish fulfilment or social validation.

It was so long ago that I can't actually remember why I got into the market but it was probably to do with Thatcherism convincing me that a PEP was one of the few ways (after buying a house) that a kid born into poor circumstances could preserve or even accumulate money. Even then I didn't think it was a get rich quick thing to do (though I did waste a lot of money on buying paper copies of "Company Refs" for a year or two).

I have never traded or gone short and never will, not my temperament. Most of my mistakes were of the "this is cheap, it can only go up" variety. If I could start over knowing what I know now I'd probably do quite well.

Edward Croft

Just be warned - there's some investment advice that I greatly disagree with at the end. I heard in a podcast that he's removing that section in the new edition.

If you're referring to rule 97 "Never follow demand", I dont agree with this either. I always(sometimes I lose discipline!) buy based on the chart's trend first than follow with the fundamentals, not the otherway round. The other rules are useful though and make sense to me, though I've not had enough time to go deeper yet or through all the rules.

I'm with Van Tharp, who says that trading is 100 percent pyschological: we don't trade the market, we trade our beliefs about the market, and because some of the rules are about improving that headspace, than this book has relevance to trading and beyond. It's a a great book so far and well worth owning.

WarrantStar

25th Jan '22

Is the above bullet point list of what people want from the market supposed to include all the possible motivations? As far as I can see it does not do that. Eg To make enough money to have more choices in life OR To beat the market to help them feel successful OR to enjoy the intellectual challenges involved. (These are my personal motivations) To me it looks like most of the list that you quoted are not good reasons for investing. I guess that's the point. If people invest for reasons like the bullet list then they are unlikely to be successful in terms of profits. Is that what the book is saying?

dcon85

I think the list is non-exhaustive but the whole point of the article, which I really like, is to highlight the difference between what we say or think we want from investing, and the sub or side motivations that are present. In either case these would be largely unacknowledged by the market participant. What need is it fulfilling?

You could have the stated aims of growing capital by A over B years with a view to providing C income in retirement (and within that retirement a whole list of lifestyle markers that the income must support). And it's not like you don't want those things... But you might also have an unacknowledged need for recognition among your peer group, at some level you want people to think, "wow, I really respect this guy, he knows his stuff, and he's done well out of it". And once you make the realisation that investing is fulfilling this need as well, you can think about your investing decisions in the frame of, am I making this call just to look good (ie. fulfil that need), or because it's most likely to grow my capital over my desired time frame.

doctor dave

Terrific commentary. It is so true that our reasons for investing are opaque. I don’t really need the money as such so why do I do it?

I like the challenge. I like the dopamine buzz. I like to compete with some friends. I like to pretend I know what’s happening. I like to show off when I got something right. I like to imagine my children will be impressed if I leave them a million quid. I like to be distracted from the every-day.

It’s all a bit tragic really but only by knowing and acknowledging one’s frailties can one become enlightened!

Bullygig

26th Jan '22

Tremendous article.

Particularly with social media I see a lot of investors driven much more by the need to be proven right, or to be able to show enormous returns more by than the returns in and of themselves.

I suppose it's just the next level of bulletin board rampers using whatever technology is available to them.

I'm very keen to be as boring as possible with my investments but definitely still get drawn in by story stocks and reckon I always will do. Some of the stories have come true, occasionally!

27th Jan '22

love the honesty djrhs! I think you’re way better off knowing this than not. I’ll try and post my own list when I get a chance!

I think this stuff is both interesting and important when it comes to the investing toolkit

28th Jan '22

"To me it looks like most of the list that you quoted are not good reasons for investing. I guess that's the point."

@Warrantstar yes - I could have clarified... I meant what are the unconscious wants/desires that people have that may get in the way of them profiting.

It's not an exhaustive list... just off the top of my list.

potter12

29th Jan '22

I guess it’s a book for younger investors. When I started investing there was no internet and no one to compete with. One had to read the FT on Saturday to catch up on investing gossip.

I didn’t realize it at the start but I was obviously a believer in delayed gratification. From the 1980s onwards I invested every bonus, including a redundancy payment. I’ve only read two books on investing (and ignored both). My strategy at the start was to invest in companies who seemed sound. Later high tech companies which soared! After “losing” a fortune around 2000 a more sensible diversified portfolio approach seemed appropriate.

Forgive my shallow personality but it was fun investing thirty years ago when, on a business trip, one phoned one’s posh broker, Oliver, from a lounge in Heathrow and told him, “sell British Gas, buy BAE”. Even more fun if the result was a significant profit!

In recent years it’s become a hobby like doing the crossword. But with life-changing results. Including the ability to give away significant sums to children buying houses and other good causes.

Today, reading Paul Scott and other commentators gives an interesting angle on modern life and keeps the mind active. A good reason to add to your list, Edward?

On this theme from Merryn Somerset Webb in the FT today:

"We like to think of equities as all sorts of things: right now, for example, all too many investors think of them primarily as virtue signalling vehicles (witness the now collapsing bubble in renewable energy stocks)."

Forgive my shallow personality but it was fun investing thirty years ago when, on a business trip, one phoned one’s posh broker, Oliver, from Heathrow and told him, “sell British Gas, buy BAE”. Even more fun if the result was a significant profit!

dbailey

11th Mar '22

Edward, This is the only

route I could find to make contact with you. I have recommend your system to a friend Nathan Clark (aged 19) studying Finance in Chelmford. He asked me do you think Stockopedia would give us a trial period or allow me to have a trial to convince the University that they should subscribe ? Any comments please. Dennis Bailey subscriber to UK and US services

Everybody gets what they want from the market... do you?

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Edward Croft

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