I have been reading a number of trader blogs recently trying to get a qualitative read on the mood hoping to find traces of capitulation. Unfortunately, the mood seems to be “hopeful.” As S&P500 approaches the November lows, VIX is actually half of where it was then. As usual, all participants are trying to determine what may happen next. Some apply complex metaphors from other paradigms to the various markets to see if these explain the numbers. Others purchase a few hundred thousand shares to boost confidence in their stocks. Government officials explain how they will fix the economy. Workers worry about their jobs, their houses, and their small businesses. I look at all this from a few different angles.
The Childhood Angle: Growing up at the observatory I had a few close friends my age. There were also the older kids and the younger kids; and as expected we had different interests. I don’t remember from where a game came about where we had to hit another persons marble with ours from a distance and if it was a direct hit (the two marbles touched), we got to keep their marble (substitute ball bearing and thrust bearing parts for marbles). The kids with the most bearing parts were considered excellent at the game. The others had to go find more balls or quit. My friend and I ended up accumulating a lot of these. A few other kids felt they were ruined when they lost their last pieces with some breaking down into tears as if life was over. Looking back, it’s amusing how much importance we assigned to these meaningless childhood games. I wonder if people my wife’s 95-year-old grandmother’s age view us with similar lens.
The Computer Systems Angle: Sometimes people build a system. Sometimes they break down a system so a new one can be built in its place. Sometimes the system has usability issues and sometimes it crashes. There are bugs in all systems. Sometimes it takes years for the particular set of circumstances to trigger the bug. The bug is usually a minor issue and by the time it is discovered, quite a lot of damage is done by a malfunctioning system. Looking back people are amazed how the bug was not obvious. It takes a minute to fix the bug but months to clean up the damage from it. Some people have specific roles to kill systems, break them down. Others simply cannot build anything so they maintain. Maintaining a lousy system is counter-progress. There are also those who, given the job and the tools to build, ruin more from lack of knowledge or inability to use the tools appropriately. Sometimes we lose power (electrical system) or all systems come to a screeching halt (9/11). Some of us participate in multiple systems all at once. In times when the system stops temporarily, life goes on. In times when the system collapses (I’ve experienced this), life goes on. When our character, beliefs, values, and families collapse, the systems do not matter.
A few other angles remain but from fear of having another very long post, I’ll stop here.