Fear, greed, and insanity can all be found in this newest installment to our ongoing multi-part exploration as to why every single thing our resident "Elliott Wave Fanatic" bases his work upon is not even wrong, but rather, mere meaningless nonsense.
As in the previous installment, the original author’s ideas are quoted and bolded, following the abbreviation “TA” for “Technical Analyst” since he styles himself as such and I’m all about respecting people’s self-identification.
My well-meaning and rant-heavy critiques will appear underneath in plain text.
Let’s dive into this sludge-filled analytical cenote and peruse the gunk!
TA: “This sentiment is an aspect of duality composed of Fear & Greed. These are opposites of each other and alone can not be in this world.”
ILTY: Anybody have a creative-commons picture of that “Wait, Wut?” pear?
In our last installment, you informed us that prices are a reflection of sentiment. We explained why that wasn’t anything other than a small part of a larger conceptual whole that does nothing to help us actually understand how various economic pricing mechanisms and concepts work in the real world.
Put differently, we showed that the very first building block at the foundation of your whole system is wrong, and that this essentially puts you down the wrong path right from the get-go.
Unfortunately, in the very next sentence about fear and greed, you go so far down the wrong path, that you’re not even on the path anymore. It’s like you tripped and stumbled down a steep cliff, whacking trees along the way, and at some point mid-tumble decided that each leafy bonk to the head is actually an important insight into the very nature of existence itself.
Guy, you’re not having insights. That’s a concussion. You should get that checked out. I’m worried about you.
But purely for the sake of argument and further exploration let’s roll with the idea that “price is a reflection of sentiment.”
I’m happy to point out the positives of what you’re saying, before we get into all the confusing vagaries.
You write that sentiment is "an" aspect of duality composed of Fear & Greed. I emphasized the "an" for the simple reason that this makes your statement “not false,” in the sense that, yeah, in a very unspecific general way Fear & Greed, understood as a duality (in whatever way you’re defining that) can be considered to have various “aspects” and “sentiment” can be conceptualized as one of them.
You see, it’s not that you’re wrong with this statement. I’m finding that you’re usually not just straight-up wrong. You don’t say things that are one-hundred percent provably false.
I have a feeling it’s because you’re actually a pretty intelligent guy and understand that making provably false statements can easily be disproven and undercut your entire raison-d’etre here on Steemit.
But even though your statement isn’t wrong, that doesn’t imply that it’s meaningful in anyway--for your purposes or otherwise.
Because, sure, we absolutely can conceptualize “Fear” and “Greed” together as some kind of duality. We just don’t need to conceptualize Fear and Greed this way.
We can just as logically conceptualize “Fear” and “Greed” as part of a “Sentimental Trinity” along with, say, “Hope.”
Even though I could have just picked some other “sentiment” or “emotion” at random, I went with “Hope” here because it’s actually a psychological factor that economists working within the field of Behavioral Economics have begun utilizing in their analyses of human interactions in the marketplace and market behaviors. 1
In this case, we have a Trinity--a concept that holds a lot of emotional connection for a lot of people, at least as much as the concept of a Duality--of Sentiments which interact in various ways within the individual and collective minds of Investors in the marketplace.
Fear can drive prices down.
Greed can drive prices up.
Hope can act as a “supercharge” to Greed, driving prices higher, faster.
Hope can act as a “inhibitor” to Fear, slowing downtrends with the sentiment that perhaps prices will recover.
These three sentiments can be understood to act in this way. It’s sensible. It has a nice, internal consistency. It’s not such a bad way to frame the world and how it works.
But there is absolutely nothing that requires this kind of conceptualization.
Because you could also model human behavior in the marketplace in all types of other ways that make just as much logical, rational, and intuitive sense.
You could keep using the Trinity of Fear, Greed, and Hope, but add in the idea that if a significant amount of investors hold a short position in a particular asset, for example, then Fear can drive prices up (short-squeezes), Greed can drive prices down (more people entering short positions), and Hope can do all types of wacky things. 2
You could also chunk the whole Trinity of Fear, Greed, and Hope altogether, and work within the parameters of a new Duality--something simple, like, say, “Optimism & Pessimism.”
The following would be a rephrasing of your theory of the basic tenet of Technical Analysis, modified to fit this new “Optimism Pessimism” duality:
“The basic tenet of Technical Analysis is that sentiment drives all price actions. Simply put, price is a reflection of sentiment. This sentiment is an aspect of duality composed of [Optimism and Pessimism]. These are opposites of each other and each alone can not be in this world.”
See how well that works? Notice how it actually works even better than the “Greed & Fear” Duality.
Because “Greed” and “Fear” are not typically understood--outside of the Technical Analysis crowd--as being “opposites of each other.”
Classical Greek Virtue Ethics and the Catholic Ethics evolving from it, understood the opposite of Greed to be Charity (understood in the broad-sense of benevolent and generous self-sacrifice for the well-being of others).
Lots of modern behavioral psychologists who study and analyze human emotions consider the opposite of Fear to be something like “Trust” or “Courage.”
Greed and Fear are oftentimes not even opposites. Fear can cause Greed. 3
Think about it. Someone puts $10.00 into a cryptocurrency in September. Today, that has turned into $1,000.00. They were originally planning on taking whatever money they earned from this and donating at least 50% of it to charity. But once the money is real
(Brief interlude to shill for one of my favorite non-profits, Direct Relief, which has 99.4% (!) of all its expenses going towards its humanitarian aid efforts and programs directly helping the most vulnerable people in society. Make “Charitable” a word that describes you, today!)
Now, though, the money is a reality, and that person starts thinking about all of the bills they can pay with that money. The bills were still there--a worrisome situation--before the cryptocurrency increase. But now that the money is actually real, the person starts worrying about those bills. “I should really keep the money to pay all those bills. What if I give half of it away and then I don’t have enough to pay next month’s bills. That makes me worry. I’m just going to keep all of it...I earned it anyway.” So the person cashes out their cryptocurrency position, converts it into fiat, and pays the bills.
All of this because the person first experienced Fear. That Fear let to Greed. And ultimately, that Greed let to almost $500.00 less going to a charitable causes than it would have if the person had not experienced that Fear.
Put differently, Fear and Greed can be a duality but they can be all types of other things too. And Fear and Greed can be understood as opposites of each other (although that runs against classical and modern theories of virtue ethics and psychology), but they can work in tandem (or, they can act in unrelated ways, not-dependent on one another at all).
So why not conceptualize a Duality of Optimism and Pessimism? That way, you can talk about bull markets reflecting an “optimistic sentiment” and bear markets reflecting a “pessimistic sentiment?”
The answer is that there is no answer.
There is no reason to focus on “Fear & Greed” rather than “Optimism and Pessimism” or “Fear, Greed, & Hope” or a “Sentimental Sextuplet of Anger, Disgust, Fear, Happiness, Sadness, and Surprise,” and so on and so forth, ad finitum…
It’s just one, not particularly useful, way to model human behavior
So, again, we see that our Technical Analyst is not wrong in the same sense as saying “sentiment is an aspect of a Trinity composed of “Positivity & Negativity.”
Sure. Ok. So what?
Because if you’re saying that this is just one way to model the world--a model that necessarily requires awkwardly shoving a number of concepts to fit within the “Fear & Greed” concepts to which you’re limiting yourself--then ok, that’s great. This doesn’t necessarily imply anything further about the world and how or why it works. It’s just a way of talking about the world. Cool. Pointless, but cool.
But if you’re implying (as I think you are) that this is THE way to model the world;
That this “is THE way the world works and must necessarily be described”;
That this is the only and best descriptive “Truth” and “Fact” of the world and human behavior;
Then, no.
You’re wrong.
It’s not.
You can’t prove that it is, anymore than I can prove that the sentiment reflected in prices is an aspect of the Duality composed of Positivity & Negativity.
Because you’re just using vaguely defined words, broad, ambiguous concepts, and small parts of much, much larger ideas, shoving them all together, and asserting that this is the way the world works.
And once you’ve made that unjustified assertion, you move on to your next assertion after that, build upon the unjustified assertion previously expressed. And on and on and on...until you’ve built up a completely dubious, improper connection between things like “the Duality of Fear and Greed” and “the little triangles on my chart tell me that the price is maybe, sort of, kind of likely to do “this thing” unless it does “this other opposite thing.”
It would be fine if you were presenting all of this as just an idea.
But your legal disclaimer is not moral absolution, and it doesn’t change the fact that your clear intention is to make calls that people will accept and follow.
You say that you are not giving investment advice.
You say a lot of stuff.
If you were really doing this for entertainment purposes, though, you could just as easily make these calls about other human interactions that can be charted, but which can’t so easily be utilized as investment advice by people less educated than you.
You could set up your ideas in a way where you could still profit from them, while also lowering the risk that people are going to follow your calls without knowing that your analytical system is built on a foundation of pseudoscience and meaningless piffle.
You could avoid making a particular call on a particular currency, and then making statements to the effect that you wish people much wealth and success.
Come on, guy.
We’re supposed to believe that you’re wishing people much wealth and success generally, with absolutely no implication involved that you are wishing them much wealth and success based on the calls and predictions about the prices of investment vehicles that you just made?
Not a single person who has even a basic economic, philosophic, scientific, or psychological education could read your essay and conclude that your analysis is based on substantial and legitimate ideas formulated with intellectual rigor.
You’ve got to be aware of all this right?
….more to come
Footnotes
If anyone is interested, here is a link to one representative peer-reviewed example of the type of work being done in this area, by Economics Professors Travis Lybbert and Bruce Wydick: Poverty, Aspirations, and the Economics of Hope accepted for publication in the University of Chicago journal of Economic Development and Cultural Change. For whatever it’s worth, I wouldn’t call myself a neoclassical economist, and I’m not married to the theories of Behavioral Economics...but you don’t have to be those things to get a lot of important and useful knowledge out of this paper and others like it).
Just as one relatively simple example of the innumerable series of events that “Hope” can be understood to trigger: Hope by investors with short positions in alternative asset classes that traditional asset class investors will have increased Fear, causing a sell-off in the traditional asset class, and a subsequent increase in Greed by investors short on the traditional asset classes, crashing the traditional asset class’s price, and causing Fear in the investors short on the alternative asset classes, itself resulting in a short-squeeze in the alternative asset class and a rise in their prices).
And Greed can cause Fear. A five year old can figure out all the ways Fear and Greed interact which don't fit into a paradigm explaining Fear and Greed as "opposites of each other."
I like the snarky under tones, but with the veneer of politeness that comes with some level of refinement.
A modern version of Buckley.
Refreshing to hear a level of refinement in the cripplingly pointed criticisms and critiques that has more sophistication than the daily rants from Hannity, Morning Joe, or Chuckie Schumer
A modern Buckley?
I mean, I’ll absolutely take the compliment as intended, but I’m positive that I’m closer to something like a low-rent Norman Podhoretz, on my absolute worst days.
Buckley (to say nothing of his contemptible views) used the English language on a different than the rest of us.
He’s up there with Santayana and Mary Anne Evans.
Thanks though!
I upvoted 100% because knowing you it's great writing to give me a geekgasm and tickle my funny bone like a $20 Filipino Chika...
But I've not had my coffee yet, I'll read you later.
Thanks!
I’d be lying if I didn’t admit that contrary to my usual apathy about other people’s opinions about what I write, I find myself appreciating it when you and DJ have good things to say about it.
Who woulda thought that the only opinions Id care about were the ones of the funny dick joke guys?
Ugh, I’m becoming too soft...have to go watch a genocide documentary and come back hardened and bitter...brb
In order to level up you will need to masturbate and edge yourself for 15 mins
I think fear and greed are more relatable and easier to understand than optimism and pessimism. Everyone knows greed, the desire for more, more money more food, more girlfriends, bigger breasts and asses, it's an easy descriptor to use for people that don't want to explain the nuances associated with optimism and pessimism.
I agree in theory the actual words used are irrelevant we could just as easily use cats and dogs but when dealing with money, fear of losing money and greedily wanting more money are easily relatable for masses who generally see wealth and think fiat money in the bank, when the reality (as ever) is far more complex
Absolutely! Fear & Greed is a brilliant way of looking at overall larger macro-trends, and as a kind of rule-of-thumb for determining some big, general patterns in markets.
What it doesn’t do (can’t do) is provide us with any information to explain why Technicals Analysis of any kind “works” by cause the Fear & Greed model requires a willful setting aside of a lot of other important information and human activity that effects the market.
It’s like trying to predict who will win a football game based on which team seems to be on a “hotter” streak and is more “motivated.”
That can give you one useful data-point on which to base a prediction, but it’s not going to be an accurate measure of a team’s probability of success or failure, because lots of other factors are involved as well (luck, team health, individual player qualities, weather, coaching and playing style matchups, etc...).
So if someone tried to say that they use team motivation as a factor to make calls on the outcome of sporting events, that’s cool. Even if they said that they find it to be the most relevant factor and set aside every other consideration, that’s fine too.
But if they said that “game outcome” IS a reflection of “team motivation” and then tried to use team motivation as THE factor from which you can continue building a theory of why and how “sports outcome analysis” is something that “works”....
Yeah, using it that way, you’d be talking nonsense.
And we haven’t even gotten to the fun part yet (where the photoelectric effect, Plato’s allegory of the cave, thermodynamics, and “water structure” are all part of the basis for by technical analysis “works”).
If anything, by breaking it up into sections, I’m doing the original author a favor, because some of what he says, out of context from the rest of his essay, seems almost kind of half-reassemble.
When you look at it all as a a greater whole, though, your mind rebels and you just keep repeating over and over again, like Bill the Butcher, “What, in Heaven’s Name, are you talking about?”
Right, but what you're saying is you shouldn't do this. And if you want to be correct in your analysis then you are correct, don't do this. But my argument is most people are dumb and lazy. I can guarantee that large bets on sporting teams have been made based on the “hotter” streak and (who) is more “motivated.”". and by using greed and fear it's that facet of society that he is pandering too.
Gamblers have short memories and only remember the wins, if you only remember the good calls he made then he is a genius because he's 100% right. Much like astrology.
Absolutely. You’re dead-on.
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