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The More Things Change; The More They Stay The Same

Money is an abstraction for exchanges among people. The money, the goods and the services between the people change, as do the parties trading, but the exchange (or market) itself doesn’t change.

Barters and trades have always been necessary for survival. To a trend follower, these same barters and trades, these exchanges represent potential trends, nothing more, nothing less, unchanged over time.

The change and volatility implicit in the markets work to your advantage. You won’t make money without them. Flexibility, adaptability, and quick response keep you nimble when you need to preserve capital during losing streaks. Don’t get caught up in the whys of markets. Markets stay the same because they will always change. But as a trend follower, you don’t care, and you always know how to react to change.

Bubbles

David Mackay published Extraordinary Popular Delusions and the Madness of Crowds in 1841. His famous essay chronicles a mania for exotic tulip bulbs in 17th Century Holland, but the example still resonates. That crowd made a seemingly infinite hunger for the flower into a speculation bubble. More recently, a crowd got caught up in a seemingly infinite hunger for internet companies. It was only the latest bubble, and it won’t be the last.

Anytime there’s a bubble or a major move, traditional investors reevaluate. Whether their hopes are dashed or their wildest dreams are imagined, they still ask: What’s next? Never satisfied. Everyone is too anxious to board the roller coaster again, front or back, up or down. Which is why when J.P. Morgan was asked what the market would do, he replied: “It will fluctuate.”

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