Market moves, and other observations

Marcus Tullius Cicero

The markets are still volatile.

After speculating about “who” might be making this happen and coming up with a few “theys” who might be responsible, I’ve been mulling this question some more.

And… found another “they.” This is a good one, but not as tin hatty as most. Could it be brokerages?

Think. Cui bono? Or, as we say in English, “Who benefits?” Or as Wikipedia says, “to whose profit?” This phrase is attributed to Cicero, described by the Encyclopedia Britannica as a

Roman statesman, lawyer, scholar, and writer who vainly tried to uphold republican principles in the final civil wars that destroyed the Roman Republic.

As an aside, my DDMIL derided him as a bombastic, bloviating blowhard. She was a liberal, educated in the late 1920s. Kind of the way my professors (late 1950s) viewed Polonius in Hamlet. I wonder who the intellectuals are making fun of these days?

American educators have been distorting history and literature since long before modern times. But maybe academe has always been iconoclastic, ironic, sarcastic and uber- sophisticated, eh?

I’m not sure of the Latin for who loses, but let’s try, Cui patitur? Who suffers? or better yet, and easier to understand, Qui perdide beneficia? Who lost benefits?

Wow. Those Romans! They had a saying for everything, although Google Translate and I made up the last one. I’m surprised it isn’t in the list of Latin phrases.

But in a market of trades, it is possible to have a win-win, or a win-lose, or, of course, a lose-lose. But in a volatile market, with wild price swings – Who benefits?  Traders. Every buy and every sell means a commission for a broker.

Big losers, or sufferers, would be the ones who got caught first in the bear trap, then in the bull trap. Nobody talks about the bull trap, but if you sell a stock that afterwards rises in price, I’d say you lost the difference by not owning the stock as it went up.

Investopedia defines a bear trap –

 A false signal that the rising trend of a stock or index has reversed when it has not. A bear trap prompts traders to place shorts on the stock or index, since they expect the underlying to decline in value. Instead of declining further, the investment stays flat, or slightly recovers.

I’d define a bear trap as selling when you think the price is going down further, but then it doesn’t. You’ve “sold low,” classic definition of a novice. A bull trap would be buying when you think the price is sure to go up, “Now’s the time to buy!” Um, no.

This is why I have been counseling my readers to sit tight as the volatility plays itself out. And I certainly hope not one of you places short sales! Big, almost guaranteed loss if you don’t have lightening fast reflexes, ability to trade instantly, and can correctly guess price directions.

Either way, if the price changes the “wrong way” – one that you did not expect, you lose.

So, buyers and sellers suffer in volatile markets. Traders benefit either way. Let this be a lesson to you. 😉

 

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About InvestingforOne

I've been investing in various assets by myself using a discount broker for many years. Over that time, I've developed some theories that others might find useful. Plus, there is more to investing than money. Time, talent, work, friends, family all go into developing a good and satisfactory strategy.
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