Different types of Personality

I have been quiet of late. I feel a lack of energy personally when thinking about the markets, I think it relates to the fact that I am painfully integrating the fact that logic and common sense has very little if any place in a market engulfed in a “complex”.

What I want to write about today stems from two recent encounters where I experienced a completely different side to a particular persons personality. Lets start with a quote about a persons persona from Jung.

The persona is a complicated system of relations between individual consciousness and society, fittingly enough a kind of mask, designed on the one hand to make a definite impression upon others, and, on the other, to conceal the true nature of the individual. “The Relations between the Ego and the Unconscious” (1928). In CW 7: Two Essays on Analytical Psychology. P.305

In both the instances I am referring to the individuals are typically shy, quiet and reserved (introverted) yet placing them in a certain public setting their persona completely changes to the opposite and they become this outgoing, theatrical extrovert.

My experiencing of these two events at first seemed quite shocking but as I thought more about it in the moment I started smiling, as I realized I was witnessing a persona in a true state of consciousness.

Consciousness-opposites

I will end with the comment that I believe the markets themselves express these very same personality attributes. You see it in volatile markets (extrovert) or in quiet low volatile markets (introverts). The bottom line is we all need to express ourselves consciously and that includes the markets. We cannot be one dimensional it is important that we experience those opposites to fully integrate what we are feeling on the inside in our unconscious minds.

My understanding of market regime changes fits nicely with this observation in a social setting.

A Romantic Idea far from Reality

In the last week I have had 2 occasions where good friends of mine both spiritual people have put forward the idea of healing oneself through the power of the mind. My reaction to their comments has sparked an atypical response in me, which tells me that if I am truthful with myself I must have a complex being constellated by their words.

On a personal note, I have a lot of chronic sickness in my family which is the source of a lot pain and suffering for all of us both physical and emotional. I guess the reason for me bristling with my friends advice is due to the fact that I believe their understanding of the workings of the world is coming from a naive fairy tale idealism that through the law of attraction all can be fixed. This notion was further enhanced by the popular book “The Secret” published in 2006 selling more than 19 million copies and heavily marketed through popular self-help television programs.

This however does not answer why I had/have this reaction. After all I do believe in the positive and negative feedback loops we create in our mind. Jung for one wrote extensively on the subject of psychosomatic disorders. I have no doubt in my mind that our incredible minds have the power to create devastating somatic illness, as I equally believe that our minds have the ability create incredible cures for some of these illnesses. I personally have witnessed through hypnosis people “anesthetized” to such an extent that surgery is performed without any drugs. I have also witnessed miracles in my own family with people given terminal diagnoses, only to become cured. So why am I so touchy?

While I think along a spiritual plane I also think like a scientist and anecdotal evidence is not something I place too much weight on, I am all too familiar with the human cognitive biases we bring to our lives. The point I wish to make is that I see the world through the lens of a decision tree. We all have FREE CHOICE to make decisions that play a controlling role in how our life will end up, so yes quite emphatically we control our destiny. What I don’t believe is that there is always a path carved into our destiny that is: healthy, wealthy & happy. Rather I believe each one of us has a destiny that is ideally suited to us. We don’t know the true meaning of happiness/sadness, pain/suffering, health/sickness, wealth/poverty and its imprint on our soul, but we sure think we do. Why am I reacting like I am, to well meaning people who are trying to help?

decision-tree-diagram3

I think maybe its because I don’t want anyone to take away the pain I/we feel. Pain is itself a healer and while I want the physical pain to go away as soon as possible I also want those around me to hold that pain with me and see it for what it is. I think we live in a society where everyone believes we deserve to have what others have. We believe it is our rights to consume and live a life of prosperity. The world has never been more indebted due to its insatiable desires to consume every gadget that comes on the market, irrespective of whether we can afford it or not . Common sense has been left at the door in favour of living in the moment. Not all destinies are ever higher stock markets and gross domestic product and a 3 bedroom home with a white picket fence. The world is a place of Divine Judgement, we don’t have all the answers.

I didn’t mean this to be rant, I wanted rather to convey that I wish we all got more real about our lives. I must therefore conclude that the fact that I am rather irritated by this notion of people saying “think positive thoughts and all will be well” is an interesting snapshot into my current state of mind. Perhaps the fact I am reacting like this is I am feeling judged, perhaps this is all a projection to my helpless feelings for my families health. Perhaps I am projecting a lack of true belief in the actual message I am putting forward here. I guess time will tell I am just trying to say it as I see it.

I will conclude that I have the same thoughts towards traders in the market place [for those of you who stayed with to the end 🙂 ]. Some of you are no doubt absolutely brilliant traders, and I have no doubt many of you will make the correct choice at each fork in your road but there is no guaranteed pot of gold at the end of each one of your proverbial rainbows.

KEEP IT REAL!!!

Money is in Balance

We often wonder to our self or discuss amongst our friends why Mr X is so rich and why Mr Y is so poor. There are endless treaties written that income inequality is wrong and detrimental to the economy and society at large.

There are many different economic arguments one can make for why capitalism and the free market in what ever degree of unequal distortion it presents, is healthy and part of the fabric of a growing economy. I want to focus on a more spiritual dimension of this equation and with a few extra variables would like to suggest that Money is in Balance despite the lopsided nature of the $ and cents ledger. My explanation is not for everyone as it requires a belief in a Transcendent Central Banker.

What if I said that some people are given extra wealth as caretakers so that they can give it to those less fortunate who have too little wealth. What if I went a step further and said that those who have excess wealth are being tested to see how they overcome natural selfish human desires, and that those less financially fortunate are being tested by having to humble themselves and ask for help. In this equation there is no role that is better, both roles giver and taker are part of the same balancing equation. You cannot have one without the other.

With this in mind Money is always in Balance the only variables that change are the degree of giver and taker required in the equation. However, when society breaks down in conflict there is a clear sign that the givers and takers are not doing their jobs properly and a COMPLEX erupts forcing a new “Spiritual Money Equilibrium”.

You can think of this note in the same context when observing traders. You get winners and losers, you get buyers and sellers, of course on paper we don’t have equality. There are winners and losers in the trading process. But think about it for a minute, what if I told you that every trader was a winner. Could you accept that? In monetary terms of course not it doesn’t add up. However, if you think on a deeper spiritual level it is possible to accept that the winner was a winner to test his ability to do good with his winnings and to also remain humble. The same can be said for the “loser” as perhaps the loss was needed to bring him down a peg, perhaps there was too much swagger in his stride.

So in this case Winner/Loser = Winner/Winner.

If you think like this and accept that our action and reactions are always part of a balancing equation then it gives a tiny sense of our PURPOSE and the fairness of our day to day existence.

[I hope this little note reads like it was intended. I am simply trying to say that everything in life happens for a reason and no matter what it presents to the world on an earthly dimension when factoring in the spiritual dimension there is transcendent fairness in play.]

 

Market Ego Development

Just a few Jungian thoughts based on Ego Development.

There are typically 2 key stages in ego development the mother (containment) phase ie. The garden of Eden type image where things are done for you in a safe nurturing way. The 2nd phase is the father (adaption/adjusting) phase whereby the ego transitions from its safe passive environment into one with anxiety and consequences.

Of course the ideal is for each stage to be experienced appropriately with a steady transition into greater challenges. When this process is done poorly or with shocks to the system Ego Defences develop thus inhibiting development. Poor development can lead to getting stuck in the early phase of development. This often leads to narcissistic behaviour or what Jung called the Puer aeternus (the eternal youth) where the ego doesn’t learn to take on any responsibility. It forever remains potential without lasting action.

I think to myself as I observe the next level of discussion taking place in Greece and how the world economies are stuck in the mother / concealment phase of their development with their reliance on Central Bankers. We know that this kind of ego development creates psychological pathology with consequences. Unfortunately we need to accept that we are sick and that we need to encounter more “father” to balance the one sidedness of our current economic development.

I fear what we have become and what we are becoming.

The Turkey Illusion meets the Dividend Trap

Let me start by saying if you are not familiar with the work of Richard Peterson from MarketPsych Data you really need to pay his site a visit and join his newsletter. He has some wonderful insights into the market and the human mind. As a psychiatrist and market practitioner he has tackled the markets from a very similar perspective to how I see the markets but I am sure with his own unique brilliant insights. In his latest letter he speaks a lot about magicians and the way they use illusions of the mind to achieve their end goal – MAGIC

Here are two quotes that I found interesting:

Gustav Kuhn, a cognitive psychologist and magician, studies how magic tricks work.  In one study Kuhn threw a ball into the air.  When it came back down he caught it, and he threw it back up in the air, his eyes following it up.  He did this twice, and on the third throw he pretended to throw it up while his eyes tracked the invisible arc of its course. Two thirds of the participants reported seeing the ball vanish in mid-air, even though it never left his hand.  In a second condition, he pretended to throw the ball in the air, but instead of tracking it with his eyes, he stared at the ball in his hand. In that condition only one-third of the subjects believed he had thrown the ball into the air. Participants misperceived the actual event based on their expectations, as set by the magician.

It’s hard to think critically if you’re laughing. We often follow a secret move immediately with a joke. A viewer has only so much attention to give, and if he’s laughing, his mind is too busy with the joke to backtrack rationally. Teller 2012.

Magic is all about an illusion it is about influencing people to experience reality according to a projected form of reality as opposed to the physics of the moment. Kind of like Bertrand Russell asking his philosophy class, is this table I am sitting on real? Putting the philosophy lecture aside for today, I think Rene Descartes provides us with a comfortable solution, “I think therefore I am”, at least it is good enough for me.

Before leaving this theme of magic one of my favourite Jungian authors is Robin Robertson who has not only written many books on Jungian psychology but has written equally many books on the subject of magic. Anyone who is interested in the human psyche is likely to be intrigued by the magic of magic. Things like fairytales, legends, myth, fantasy are all tremendously rich repositories of our collective wisdom and therefore a vital part of the makeup of Jungian Psychology and our understanding of the human psyche. The lessons for life from these sources are eternal………

If you can hold that introduction of the illussion in mind I think you will get a great sense of the wonderful illustration Nassim Taleb draws with his Turkey surprise. You see the owner of the Turkey feeds him every day with a nice meal, this continues day after day after day, so the turkey gets used to this as the continous cycle reinforces his perception of the good life. What the turkey doesn’t realize is that his life is great for 1000 days as each day is the farmers investment in getting him good and plump so that he can make an appetizing meal on Thanksgiving. All it takes is one day to shatter the illusion.

turkey taleb

Let us take this knowledge of the magicians illusion and the thanskgiving turkey and apply it to the world of finance. This knowledge is a tool for one of the great illusory cons that peddlers of financial product use to make the sale.

Firstly, people like to make money a lot more than they don’t like to lose money (see: Prospect Theory and its sub-heading Loss Aversion for more) armed with that information if you can provide an investor with something that produces regular steady gains you will have suckers most of the time. It gets worse, because some investors are more astute and realize the consequences of a strategy with steady gains like in the chart above usually result in an abrupt ending, they however feel (or the salesman convinces them as much) that they will know when to get out. The signs will be obvious they believe, and yes they are correct in hindsight the signs are very obvious but through the front windshield, clear road and blue sky is what they see, after all isn’t that what they have seen for the last 1000km on the road.

As in the chart above and many aspects of the financial landscape we are dealing with a zero sum game, so thinking you can identify when to get in and when to get out for those without an edge is nothing but a fools game. With that backdrop I wish to highlight 2 further examples (3 & 4) I have been thinking about as extenuation’s of the Thanksgiving Illusion.

  1. We are very familiar with this illusion with martingale strategies where traders keep doubling the trades that go against them to make a small profit if all goes according to the plan which it usually does 90% of the time. Depending on the luck of the entry into such a program you can enjoy many months of almost daily profits with very few losing days while under the martingale illusion. As we know martingales eventually expire like the Turkey.
  2. Another example of the same theme is when option writers sell (gamma) premium, picking up a dollars in front of the proverbial steam roller, only to have one unexpected surprise causing the trader to be rolled over flat.
  3. A newer version of this old trading them is when home owners borrow money in a foreign currency to benefit from the positive carry. I believe there were hundreds of thousands of people in eastern Europe who borrowed money in Swiss Franks for their home loan. Suddenly with the Frank shooting up they face bankruptcy with a very much more expensive home loan i.e. not only are they penalized on the increased monthly payments but if they wish to payoff the loan or roll it they have to take a major capital knock on the amount of the loan as well. I know of others doing this with the Yen.
  4. This final point is what motivated me to write this letter, I will call it the dividend trap. In the old days people bought bonds for yield and equities for capital growth. We now have a situation where equities are paying a lot more dividends than you can get in the bank or even in the bond market (see chart of the S&P500 below).

div yield

With my final point about the dividend trap, I am not making a forecast that because of this high dividend yield in the market relative to bond yields that equities are going to fall over tomorrow. What I am saying is that the current market setup is an illusion. You do not get rewarded with capital growth and with more income than a much less risky fixed income investment unless you have been blinded to the risks of your investment.

I feel quite categorical about this statement, the financial market place is currently operating under an illusion of fair pricing, don’t think you can safely park your money in equities and earn this high yield and enjoy steady capital appreciation forever with bond yields barely existent; and don’t think you will know when it is the right time to stop the dopamine “feel good” these regular profits are producing and having on you.

I would rather “I think therefore I am” and cast away the illusions robbing us from living a real life.

Why are we so scared?

The question I pose in the subject line is not reserved for traders, I believe we are all suffering from a relative form of fear at different times of our day. I do however, feel traders or any other professional whose “worth” is easily calculated by the $’s and %’s they notch on a ledger, encounter the emotion of fear far more acutely than people who are able to “hide” in the pack when their value-add is being evaluated. I would classify professional sportsmen in the same grouping as traders.

There is a Kabbalistic idea that fear comes from being alone. This is why so many of us who expose ourselves by applying our trade in an industry that measures skill in black and white are so perpetually afraid. Don’t you remember when you were a child, going to a party on your own filled you with fear. Think of all the times in your life when you were absolutely petrified, I am sure at the time you felt alone, alienated, misunderstood.

Like all forces in life there are opposites to counterbalance the force of energy. The solution to being afraid is simply not being alone. We can achieve this in many ways and on different levels, sticking with the child going to parties on their own, a practical solution is to go with a friend. Likewise as a trader it may help having a partner to assist with certain decision making. On a deeper more spiritual level there are times when there are simply no physical solutions. Its at these times believing in a higher power and the partnership that comes from a spiritual relationship is the only cure to an existential loneliness.

Jordan the Trickster

When I think back to the surprise move by Thomas Jordan the Governor of the Swiss National Bank on the 15th January, where he unpegged the 3yr old peg of the Swiss Franc and the Euro, I am reminded of the mythological symbol of the “Trickster”.

trickster-21  or a more contemporary example joker

Before I describe the Trickster in more detail, let us first look at the reason for drawing this comparison. Over the last decade or so Central Bankers have become masters at telegraphing their next move. The idea being that markets today are so finely tuned with 24hr connectivity 6 days a week that unexpected moves often result in large shocks to capital markets. In order to avoid these “shocks” policy makers hold multiple press conferences where they drop subtle hints as to what is likely to be the policy in the future.

Swiss National Bank Chairman Thomas Jordan had assured us just the week before that the Swiss would continue to “hold the peg” whereby the SNB kept the value of the Swiss franc from rising higher than €1.22. “The cap is absolutely central,” he said. And SNB Vice Chairman Jean-Pierre Danthine said publicly only last Monday that the peg would remain a cornerstone of Swiss banking policy. Do you see how these G-d like characters were able to take the faith bestowed upon them and trick the world in order to achieve their objective.

Just so you know that the move was not impulsive but rather carefully thought out, this is what Jordan says. “It was not a panic reaction, it was a well-considered decision….. You can only end a policy like this surprisingly. It is not something you can debate for weeks … We wanted to win back some flexibility. In these few words one can start to see the trickster at work.

Ok it is time to learn a little bit more about the mythology of the trickster as studied in folklore, religion and importantly from our perspective psychology. Lets look at how Wikipedia describes it, “a trickster is a god, goddess, spirit, man, woman, or anthropomorphic animal who exhibits a great degree of intellect or secret knowledge and uses it to play tricks or otherwise disobey normal rules and conventional behaviour”. This definition will not explain enough if you have not spent time delving into mythology, therefore to see what I am seeing with the trickster connection to the Swiss Central Banker, I need to share some of C.G. Jungs insights.

Jung writes about our subject in “On the Psychology of the TricksterFigure,” in Collective Works 9i, par. 472 from which I hope to tease out some interesting ideas to bring this analogy home.

There is something of the trickster in the character of the shaman and medicine-man, for he, too, often plays malicious jokes on people, only to fall victim in his turn to the vengeance of those whom he has injured…………His “approximation to the saviour” is an obvious consequence of this, in confirmation of the mythological truth that the wounded wounder is the agent of healing, and that the sufferer takes away suffering.

We see that the trickster figure is often seen to have great healing powers. If you give this just a moment of thought, and think about how we confer so much healing powers on the Central Banker almost like the old Alchemist who were able to turn lead into gold. However just like the trickster in mythology is seen as part deity we through our collective unconscious see the Central Banker with Omnipotent powers. Like the medicine man, Central Bankers are often forced to dispense unpleasant medicine, such as raising interest rates when it seems like the party is getting too wild. However, sometimes the medicine can be too severe and it can cause the patient (economy) to become sick and recessionary or deflationary.

Now if the myth were nothing but an historical remnant, one would have to ask why it has not long since vanished into the great rubbish-heap of the past, and why it continues to make its influence felt on the highest levels of civilization, even where, on account of his stupidity and grotesque scurrility, the trickster no longer plays the role of a “delight-maker.” In many cultures his figure seems like an old river-bed in which the water still flows. One can see this best of all from the fact that the trickster motif does not crop up only in its mythical form but appears just as naively and authentically in the unsuspecting modern man—whenever, in fact, he feels himself at the mercy of annoying “accidents” which thwart his will and his actions with apparently malicious intent. He then speaks of “hoodoos” and “jinxes” or of the “mischievousness of the object.” Here the trickster is represented by counter-tendencies in the unconscious, and in certain cases by a sort of second personality, of a puerile and inferior character….I have, I think, found a suitable designation for this character-component when I called it the shadow. On the civilized level, it is regarded as a personal “gaffe,” “slip,” “faux pas,” etc., which are then chalked up as defects of the conscious personality. We are no longer aware that in carnival customs and the like there are remnants of a collective shadow figure which prove that the personal shadow is in part descended from a numinous collective figure. This collective figure gradually breaks up under the impact of civilization, leaving traces in folklore which are difficult to recognize. But the main part of him gets personalized and is made an object of personal responsibility…………

Anyone who belongs to a sphere of culture that seeks the perfect state somewhere in the past must feel very queerly indeed when confronted by the figure of the trickster. He is a forerunner of the saviour, and, like him, God, man, and animal at once. He is both subhuman and superhuman, a bestial and divine being, whose chief and most alarming characteristic is his unconsciousness. Because of it he is deserted by his (evidently human) companions, which seems to indicate that he has fallen below their level of consciousness. He is so unconscious of himself that his body is not a unity, and his two hands fight each other.

I realize now as I suspected before starting this letter, I will need to deal with this subject and similar ones in more detail in the book I am currently writing, “The Market Complex“, as it is very difficult to condense these ancient concepts without working through examples through different civilizations to bring them to life. For those of you not versed in reading Jung in the original you might find it extremely confusing to say the least to comprehend these quotes. What I love about Jung’s writings is his intrepid way of confronting the metaphysical while remaining grounded as a positivist, always treating his work as a scientist despite the spiritual content.

As we have seen in countless articles in the media since the SNB unpegged; businesses and investors who have lost a fortune are blaming this on “the impossible”, as if they were chosen by the G-d’s to be victim to this inhumane behaviour. These people are behaving as Jung is suggesting in an unconscious manner. The fact that these “victims” cannot see that they have built a structure without a foundation is lost on their consciousness. It is so hard to comprehend that it is us, our current cultural environment that has created the tricksters we so despise. But the positive that can be taken from experiencing the trickery is that it is usually the precursor to the Saviour Archetype.

I would suggest that we as a society have projected a Saviour Archetype onto the worlds Central Bankers but what we are encountering is the Saviours Shadow in the form of the Trickster.