Trader: "It's Amazing What Just Happened On Tuesday"
Authored by Bloomberg macro commentator Richard Breslow
Hedge Away Your Fears by Taking on More Risk
Sadly, it has become all too common for traders to get fixated on one specific thing, which may or may not happen. They then find themselves unable to make trading decisions based on the inputs that one would normally expect to drive things. Economic numbers cause momentary blips signifying little or nothing. The situation is magnified on Fridays when we take for granted that anything could happen over the weekend. Who wants to go home short bonds when a tweet can ruin your best laid plans?
But I have to say, it was amazing what just happened on a Tuesday. When the Tesla CEO started his messaging barrage, trading seemed to seize up everywhere.
People could have been forgiven for asking why this particular news caused trading to be suspended for the entire membership of the S&P 500. Bond and foreign exchange traders were similarly transfixed
Without question, it’s a great story. The buzz was palpable. But I wonder how much of it was an intense interest in this particular company and man. Or whether we have just become trained to stop doing what we are supposed to as soon as something new and confusing shows up. Everyone just pushes back from their keyboards, engages the go-slow button on their algorithms and waits.
It’s a phenomenon that has become so common that, even if noticed, goes largely unremarked upon. But it’s very unhealthy. We used to be paid to try to diligently stay focused and, mostly, engaged during the lulls in order to be prepared to spring into action when something happened. Now it’s quite the reverse. When the best opportunities present themselves, no one wants to play. And worse, when they’re most needed, the transactors go MIA.
True this is indicative of the fact that much of the news can’t be factored into models. But also that traders remain much more afraid of losses than motivated by gains. It seems to be true regardless of whether they are institutionalized or not. And we have raised a generation of market participants who are largely fatalistic. I never hear anymore that you must learn to make your own luck.