Sunday, August 05, 2007


Traders who work in the financial markets don't have time for poetry.

This is unfortunate, since there's one poem that contains a lot of helpful advice for those who have been in the red these past few weeks.

The English writer, Rudyard Kipling wrote a famous poem in 1910 entitled, If. It opens:

"If you can keep your head when all about you are losing theirs..."

In the financial world this could be taken as meaning:

"A contrarian investor has much to gain". Or more concisely:

"Buy low, sell high".

But there is also a deeper message. It stresses the importance of self-belief and, more importantly, scepticism towards what other people are saying.

If you take any message from this poem, it should be that while sometimes you may be right and sometimes you may be wrong, if you stop believing in yourself, you might as will give up and go home.


The past two weeks have seen significant losses across equity markets around the world. At the same time there is a belief among many that not only was it coming, but it's only just begun.

If you stop and consider this for a moment you realise that anything anyone says about the financial markets will always have an implicit bias.

Anyone with an opinion about financial markets either has money, their reputation or both at stake. If someone had expected markets to fall then they are likely to say the markets have further to fall. If they hadn't expected markets to fall, they probably won't expect them to fall much further.

Who should you believe?

The first point to make is that until now a lot of people had been expecting a "correction" in the markets "at some point", so the appearance of such a move is proof to many that not only were they right, but they were right when others had not believed them. This "pride" effect takes time to subside and since pride is always expressed loudly, it tends to find its way into the mainstream media faster than Paris Hilton on her way to jail.

Then there are those who didn't expect it to happen and weren't prepared for the consequences. These people are more in shock than anything else and will be pretty much useless for providing advice until things recover completely, which could take days, weeks or months.

Finally, there are the select few who saw it coming a mile away. They knew exactly when a significant selloff would take place and positioned themselves accordingly. Unfortunately, these people rarely express their thoughts in public. Think about it, if you knew when panic would strike markets and everyone would rush for the exits at the same time, would you advertise that fact? Unlikely.

In reality, the only person whose judgement we can truly rely upon is our own. Today's winner is likely to be tomorrow's loser.


"If you can make one heap of all your winnings and risk it on one turn of pitch-and-toss, and lose, and start again at your beginnings and never breathe a word about your loss..."

Never breathe a word about your loss. In other words: a loser never says when they losing while a winner usually tells you when when they're winning!

Everyone is wrong some of the time, so when they're right and they let you know this, be wary of not only what they are telling you, but why as well.

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