Saturday, 4 February 2012

Constant Change

I was thinking about SJ’s recent Behind The Times post, in particular Douglas Adams’ comment that:
Everything that's already in the world when you're born is just normal, suggested Adams. Anything created between birth and the age of 30 is incredibly exciting and creative and with any luck you can make a career out of it. But whatever is invented after you've turned 30 is against the natural order of things and the beginning of the end of civilisation as we know it - until it's been around for about 10 years, when it gradually turns out to be all right really.
It does rather neatly encapsulate the experiences of many of us over a certain age. I believe I’ve mentioned before the story of my decision to move from a career in banking to a career in ‘computers’ many years back. My mother was horrified. I was giving up a secure, job for life, position with the venerable National Westminster Bank for a twelve week computer programming course with no guaranteed job at the end of it, and the very real, in my mother’s mind, risk that “computers might not catch on”. Luckily for me, computers do seem to have caught on, although for my parents they remain a complete mystery.

My father’s mantra, applied to other advances in technology such as the door bell, electricity, showers, central-heating, stereo, colour TV, remote control etc. runs along the lines of “we’ve managed perfectly well until now without [insert technology here] - why do we need [insert new technology here] now?” 

Thus we were quite probably the last house on the street to own or install many of the items listed. For example, it was only after I had left home that my parents finally installed central heating in the house I was raised in. My bedroom was the converted attic, and my childhood consisted of ten uncomfortable months a year, with only May and September seeing survivable temperatures in my room. 

Winter was bloody freezing, and summer oppressively hot. Well, 1976 was hot anyway – most of the other Summers were probably typically English, i.e. hard to tell when they were here. It’s a wonder I survived. A shower was installed a few years ago, and I was exaggerating slightly about electricity and the door bell, although candles and a knocker would have sufficed for my Dad I’m sure. 

Rumour has it that he’s now even considering trading in his horse and cart for one of those ‘new-fangled automobile contraptions’. I’m not holding my breath though. Resistance to change does seem to be part and parcel of old age, although I suspect that in previous generations, part of the reason was that the pace of change was much slower, and thus more of a shock, whereas for the baby-boomers and following generations as they get up there in years, we will be a little more accepting as the pace of change in our lifetimes is so much faster.

So to tie this rambling to a gambling / betting / trading theme, which is after all the reason why anyone reading this is reading this, at what age does youth and its (broadly speaking) acceptance of new technology count for more than experience? 

I wrote a post a while back reporting that research showed that the age of 53 was the tipping point for making sound investment decisions. After that age, it’s all downhill for financial investment decisions apparently. Get yourself a financial advisor or failing that, a son with a degree in Accounting and Finance. The former might be the cheaper option incidentally, although probably not so much fun to spend time with though.

But for sporting investments, is there a magic number? It’s a given that we slow down with age, our brains take longer to process information, which is clearly a disadvantage in some in-play situations, but on the flip-side, there is a benefit to having watched so many more events than the 18 year old, still wet behind the ears, who may process information faster, but may not be interpreting the information as well as someone more experienced. 

The older trader may be more cautious too, although given that his ‘bank’ is likely to be larger than that of the younger trader, percentage wise that might even out. The maxim “there are old traders and there are bold traders, but there are no old, bold traders” might not be true, but if we replace ‘bold’ with ‘reckless’, then it would be. There are certainly times when it pays to be bold in the markets – Warren Buffett suggests that is when others are fearful – but being reckless is another thing altogether.

One other thought occurred to me last night, (two in one night, something of a record), which was about the stand-offs you sometimes see in thinner markets. It’s useful to know where the market has been in these situations. For example, in a proper trading sport - the NBA is where I first noticed this - a team might go on a run, and trade at let’s say 1.3 for a large amount. 

As is often the case, this price was an overreaction, taken my Mr. Greedy, and during the inevitable time-out called by the team on the wrong end of said run, the price adjust to around, say 1.42. Now if you have backed at 1.3, you might well be suffering some buyer’s remorse at this point, and be looking to cut your losses, but if you had layed at 1.3, you are not so desperate to close out of the position. 

Knowing what has occurred before gives you a clue as to whether the next match is likely to be at the 1.44 price where the earlier layer is looking to lock in profits, or at 1.4, where the backer (Mr. Greedy) is trying to cut his loss, and is now Mr. Fearful. Incidentally, for a quick and low-risk strategy, it’s often worth jumping in with a lay at 1.41 in this situation, and if matched, backing back at 1.43 or one tick below the best available (all prices are of course for illustrative purposes only).

1 comment:

BF said...

“there are old traders and there are bold traders, but there are no old, bold traders" - apparently also an aphorism regarding mercenaries also from a recent history of the Englis Civil War I read (there are old mercenaries and there are bold mercenaries ...etc". Other favorite being "well managed this war will last another 20 years". Not sure how the latter applies to trading mind.