Market Manifesto

We speak here of telling the truth and of lying, espe­cial­ly to our­selves.

If we are to be suc­cess­ful traders, we know that we must devel­op clear vision and see things for what they are, and not deceive our­selves about the nature of the world. Clear-eyed, saga­cious, aware. Not a bad com­bi­na­tion for any­one.

But we have to under­stand that clear-eyed undis­tort­ed vision is rare.

We are not born that way. (Despite our roman­tic fan­tasies about the pure unal­loyed vision of chil­dren, they do not come into the world equipped with non-dis­tor­tion glass­es.) Nobody steps onto life’s stage with a man­u­al that tells them how to use their brain, or how to get the most out of it.

We all know what lying is – it is an untruth. We lie when we tell some­one that some­thing is so, when it is not. With­out get­ting into a big dis­cus­sion about rela­tion­ships and white lies and dis­sem­bling and social fic­tions and oth­er minor man­i­fes­ta­tions of the fab­ric of our dai­ly lives, we can agree that in gen­er­al lying is a bad thing. Our lives are much less com­pli­cat­ed and more man­age­able and enjoy­able if we can tell the truth, and where lying does not play much of a role.

That is cer­tain­ly the case for lying as con­ven­tion­al­ly under­stood, in com­mon life.

But in the are­na of con­scious­ness where enhanced aware­ness is the goal, we apply much more strin­gent stan­dards.

There is a spe­cial form of lying that is uni­ver­sal and ram­pant. It cor­rupts our per­cep­tions and caus­es all kinds of prob­lems. We con­stant­ly engage in this form of lying, and we nor­mal­ly do not rec­og­nize when we are doing it. And yet it is very harm­ful to our efforts to devel­op self-aware­ness, and to our desire to be con­scious of our­selves, and of the world around us. This form of lying is not at all help­ful in our efforts to become great traders.

This kind of lying is fun­da­men­tal­ly lying to our­selves; it involves think­ing and say­ing things that we do not know to be true. We assume we know, and we say we know, and we think we know, but we do not know. This hid­den lying dis­torts or con­ceals from our­selves the true state of affairs and makes it much hard­er for us to per­ceive accu­rate­ly either our­selves or the world about us. Unless we get a han­dle on this kind of lying, we will not make the kind of progress we would like to make. It will be much hard­er to become aware, and that is our major over­all goal, to devel­op high lev­els of per­son­al aware­ness.

So, we lie when we say or think things that we do not know to be true.
And in like fash­ion we also lie when we accept as truth the ill-found­ed state­ments of oth­ers.

What are some exam­ples of this hid­den lying? You need not look far afield. Mon­i­tor your con­ver­sa­tion with a friend, or your own thoughts, or the state­ments in a news­pa­per, or on tele­vi­sion. What do you real­ly know about the accu­ra­cy of most state­ments, when this enhanced stan­dard of truth is strict­ly applied? Not much, I’ll wager. Most peo­ple con­stant­ly say things that are not true, and repeat as fact the asser­tions of oth­ers, which are equal­ly capri­cious. Peo­ple con­stant­ly indulge in slop­py eval­u­a­tion and base even the most impor­tant deci­sions on the flim­si­est of infor­ma­tion. (Of course we under­stand also that when one is in the grasp of a huge pow­er-based orga­ni­za­tion, such as fas­cism, com­mu­nism, reli­gion, the mil­i­tary, polit­i­cal move­ments of all kinds, gang­ster orga­ni­za­tions, in short all envi­ron­ments of pow­er, one may have to lie to sur­vive. But this is like­ly to be a con­scious lie, of which we are aware.)

Here is an excel­lent exer­cise to train your mind to this high­er stan­dard:
Lis­ten with pre­ci­sion. Ask your­self con­stant­ly, “Where does that come from? Who says so? What stan­dards of proof do they apply? How is this known? Where is the sub­stan­ti­a­tion for that state­ment? How do we know that is cor­rect? Apply these stan­dards to your own thoughts also. Notice your casu­al­ly held opin­ions, and your firm­ly held opin­ions, and then ask your­self on what basis you believe these things to be true. Do you actu­al­ly know any­thing? You may be sur­prised at how lit­tle you can actu­al­ly ver­i­fy.

Anoth­er tech­nique is to assume that a state­ment is a lie from the get-go, and then try to dis­prove it to your­self that it is in fact a lie, or the reverse.

The Sto­ics had this down pat. They would say, “Apply words in a pre­cise man­ner, and call objects and actions by their right­ful name. Avoid hasty con­clu­sions and unwar­rant­ed induc­tion. If you have an acquain­tance that you have seen drink a large amount, say he drinks a lot, not that he is a drunk, unless you also have the full pic­ture and can make that judg­ment. If a child breaks a dish, say that she has bro­ken a dish, and not that she is clum­sy, unless you have the full pic­ture. If you find a dol­lar in the street, say that you have found a dol­lar, and not that you are lucky.”

This busi­ness of say­ing as true that which you don’t know to be true is ubiq­ui­tous. Once you become alert to it you will like­ly be amazed at how often, and how eas­i­ly, we lie in this man­ner. It may take a lit­tle while but if you mon­i­tor your­self and the world around you with this stan­dard in mind, you will begin to devel­op a sense of peace and wis­dom that is most wel­come and refresh­ing.

The rea­son this is refresh­ing and gives you ener­gy is that the mind is not bur­dened with hold­ing up a pho­ny façade built out of all these hid­den lies. We need not devel­op and main­tain so many con­clu­sions about things that may or may not be true. We mere­ly accept those things as true which actu­al­ly are, and let the rest go.

In our per­son­al life we will see this hid­den lying crop up in exag­ger­a­tion, in boast­ful­ness, in moments of high­er-than-aver­age emo­tion, such as eupho­ria or depres­sion. We will detect it as a reflec­tion of our desires, needs, and fears. It lurks in our prej­u­dices and in our cul­tur­al stan­dards, and in our fam­i­ly his­to­ries and fil­ial con­nec­tions. We will come to see it as a reflec­tion of some con­t­a­m­i­nant to our clear vision and aware­ness.

I’m talk­ing about this hid­den lying now because in trad­ing we are con­cerned with how a mar­ket lev­el breaks or holds, and how change occurs on the mar­gin, at the edge of change. This is exact­ly the place where hid­den lying is the most dan­ger­ous to our eco­nom­ic inter­ests while trad­ing and to our per­son­al aware­ness as indi­vid­u­als. This is the very place where we must be the most vig­i­lant in our obser­va­tions and the most skep­ti­cal about the authen­tic­i­ty and accu­ra­cy of our infor­ma­tion.

Typ­i­cal­ly in the mar­ket price moves to a key lev­el that will hold or not hold and we have an opin­ion about what will hap­pen. Typ­i­cal­ly this opin­ion is not based on the most objec­tive of infor­ma­tion – that is to say there are ele­ments of lying in the way we devel­oped our opin­ion. Because we are fun­da­men­tal­ly lying to our­selves, we talk our­selves into think­ing that the area in ques­tion will hold, and take risks based on that idea. A clear-eyed assess­ment would rein­force the fact that we do not know if the line will hold or break, and we need to watch and see what actu­al­ly hap­pens, as opposed to skew­ing our belief one way or the oth­er absent actu­al fac­tu­al infor­ma­tion.

Sim­ply put, we lie to our­selves because it is con­ve­nient, it is com­fort­able, and we are used to it. The solu­tion is also sim­ply put (though per­haps not so sim­ple to imple­ment): don’t take any­thing on faith; ver­i­fy every­thing your­self.

My friend Char­lie likes to say that lies are sweet, and the truth can be very, very bit­ter. Expe­ri­ence bears this obser­va­tion out; many lies are per­pet­u­at­ed because the alter­na­tive truth is unwel­come or seem­ing­ly repug­nant. But there is anoth­er apho­rism we could set forth here: lies are expen­sive, and the truth is cheap. When we lie to our­selves, we must main­tain that lie, and main­tain­ing a lie means we must put more and more resources into that lie as we move fur­ther and fur­ther away from the under­ling real­i­ty. But once pur­chased, the truth is cheap. You only pay for truth once, and then it is yours for­ev­er.

Expert traders become expert at spot­ting lies that are mov­ing away from the under­ly­ing truths, and take advan­tage of that fact. A stock that is over­val­ued is a lie that is mov­ing away from the truth of its under­ly­ing val­ue. Cen­tral bankers prop­ping up a cur­ren­cy against the real­i­ty of a dete­ri­o­rat­ing trade bal­ance are invest­ing in a lie, and traders can take advan­tage of that activ­i­ty. But if you wish to spot such oppor­tu­ni­ties in the world. then you must train your­self to dis­cern truth at the high­est lev­el, which is also the place clos­est to home where truths and lies live and hide — in your own thoughts, inside your own mind.