Ever since I was a kid, I’ve always been interested in the stock market.
Now, I’ve played a bit here and there, and made some cash here and there, but I certainly ain’t no Wall Street guru.
Still, the markets in general have always fascinated me.
There’s a book called “The Wisdom of Crowds,” by Surowkiecki, where he describes some pretty freaky stuff. Stuff that only the “crowd” can know.
For example, in the late 80’s the space shuttle blew up. Live on TV. A horrifying event. There were three possible reasons. And for each potential reason, there was a company that made that particular component.
Let’s call them Company A, Company B, and Company C.
Within thirty minutes, all three companies literally tanked on the stock market. Then, before the end of the day, Company A and Company B had returned to where they were then the markets opened.
Company C, however, never recovered.
Six months later, the scientists at NASA determined that Company C was responsible for the explosion, and the death of those people.
Yet the markets, the large mass of traders, likely none of which had ANY experience in building space shuttles, knew.
What took NASA six months to figure out, the crowd knew within one day.
One of my favorite all time books on the stock market is called “Reminiscences of a Stock Market Operator,” by Lefevre. Lefevre is a pen name for Jesse Livermore, one of the most famous market operators of all time.
I kind of like that name, “operator,” instead of “investor” or even “speculator.”
Anyhow, one of his famous quotes is:
“Don’t fight the tape.”
The tape he’s referring to is the old time ticker tape that comes out with the stock prices on there.
Meaning if the stock market is moving up, you should be moving up with it. If the stock market is going down, you should be going down with it.
See, in his career, Livermore frequently tried to “fight the tape,” meaning he thought he could “out think” the markets. But every time he got burned.
When it comes to human behavior, we’ve got our own internally programmed tape. The instincts that have been in our heads and DNA for thousands of years.
You can go along with it, or you can try and fight the tape.
But in order to an efficient operator in your own reality, “not fighting the tape” is pretty good advice.
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