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Pastimes : Richard Ney and the Wall Street Gang -- Ignore unavailable to you. Want to Upgrade?

To: m-top who wrote (184)	2/23/1998 1:08:00 PM
From: Robert Graham	Read Replies (1) \| Respond to of 492

Some of the more strange behavior I have seen from people happens in their relationship with money. As you have stated, most people are vulnerable to the money and the effects it can have on their brains. I am beginning to think there is a commonly possessed gene that can be associated with this. So in this sense it appears to be human nature. But at the same time, money can act like a drug to others. This is where I think among others the addictive personality types come into the picture. Their brain rationalizes their actions. An outsider can see a different picture when this individual's behavior moves toward its predictable self-destructive end. Unfortunately this same outsider may be fooled into letting this person help lead them to the same end. What is interesting is that this type of risk taker who participates in the stock market can have many followers. This is particularly true if the addictive personality type has had initial success in the markets. So this person has in some way come across something that works in the current market. They think they understand their success, but they actually do not. Their focus leads them to take growing risks in the marketplace, even against their previously made better judgement. They ride of the emotional wave of their success. Something happens. Either they take that additional risk which leads to great losses, or the market changes on them which causes them to lose a great deal of money. This happens because their awareness did not include the market itself, but what they were doing that happened to create for them their profits of success. Also as they take additional risks, they tend to become less focused on what they are actually doing and are out of touch with its significance in how their actions are undermining their success. IMO that is why you see the "shooting stars" in the market that generate allot of initial publicity. They rarely survive one market cycle, and by the end of the second market cycle, those that managed to retain their "market guru" status through the previous market cycle are usually out of the picture. Their initial success and even the attention it gave them are factors that facilitate their undoing. This is the kind of market player I think everyone needs to be aware of and must be careful not to get caught up in their enthusiasm and initial market successes. They may be well-meaning individuals, but they have problems with respect to their pursuit of money which undermines their efforts in the stock market. This is the type of person I was thinking of when I was reflecting on the more extreme forms of this problem by some people in their pursuit of money when I stated it as a form of mental illness. I was a bit extreme in choosing this term, but it was the only word that came into my head when I thought of some of the people that I have seen who had this problem. Their end is predictable and can be predicted well in advance. Outside of this context of pursuing money in the stock market, they can be rational, intelligent, and even sensible people. But in the context of the stock market, they pursue their self-destructive path like a moth does to a flame. It is just that they may meet their end in what starts out as wide spirals around their flame that has the appearance to them and others who follow close by them of not having a path to the flame yet which eventually does bring them into contact with financial disaster. I have seen this happen frequently enough to this type of person and their followers, even here on SI, that I wanted to mention this observation of mine to others through my posts. I think participating in the market, and in particular trading in the stock market, has as much if not more to do with understanding yourself as it has to do with understanding stocks and the marketplace. If you want to know what is the market, just look at yourself. There are many more like you and many other people who collectively make up the market with price providing the leadership. Even when you make your decision based on fundamentals to invest in a stock for a period of time, when the price behaves unpredictably, and in particular drops to incur the stock holder mounting paper losses, this will impact you and everybody else's decision involved. After all, it is price action that determines one's eventual success in the market and not fundamentals. It is just that the longer term investor is making decisions based on there being the valid connection between fundamentals and the longer term price action of the stock. But once this type of market participant determines they have made a mistake based on the price action of the stock and how it unfolds over time, they will change their decision accordingly. Price reveals much about the participants in the market whose actions collectively determine the prices in the marketplace. Kind of a circular connection here, but a relationship I have found to be very true and very helpful for instance in determine if an upcoming market correction is developing in the current market. Bob Graham