Chapter 4: Mindfulness Training for Traders

10th February 2011

Mindfulness Training for traders: Naming and Taming their 'Inner Demons

25 thoughts on “Chapter 4: Mindfulness Training for Traders”

  1. Anonymous says:

    Hi Shaun

    I cannot see how Eurobonds is a solution for the Eurozone crisis – even Mr Draghi concedes this idea is only one for the long term and would need the creation of a central Finance ministry for the Eurozone to change a club with rules to a sovereign entity/liability transefr pact. Treaty re-writes, referenda,Parliamentary votes etc etc. Even if this was an agreed agenda, the EFSF would then become held to ransom in that markets would see it as a surrogate for Eurobonds with disaster if the end goal was not reached – wouldnt it? Banks would be hardwired to the same expectation.

    1. Anonymous says:

      Whatever schemes Sarkozy and Merkel come up with, the truth is that there are only two options. First, the Germans and their relatively well-off northern pals pay, and keep paying indefinitely to sustain lifestyles that have not been earned, and of course pay off the debts from the past. Big problems with that, not least consent of the payers, the huge amounts involved and the loss of incentive for the South to improve. Second, the Euro splits into two, rich and poor. Big political problems with that, loss of political capital and face all round and probably ultimate break-up of EU into two opposing camps, At least the finances would work, more or less but there would be political chaos, just what the EU was supposed to eliminate.  

      Whatever happens, including the current bout of indecision and endless and ultimately pointless fudge, the two solutions are those above. There aren’t any others that have emerged yet.

      Oh, and there’s all that inconvenient debt in French, German, UK etc banks. That bill is clearly for taxpayers.

      How S&M convey this situation to the 500m people whose de facto rulers they are,  I have no idea, but the longer they leave it, the harder it will get.

      Meanwhile, we are engrossed with our rioting, nobody is thinking about the EU except Osborne and his ideas have been shunted aside by S&M.

      1. Anonymous says:

        Thanks Barncactus, on the basis you rule out QE a L’Europe/inflation, strong resumption of growth which might lessen the severity of the corrections coming I would say that either of your two options will involve creditors ( public/private) writing off debt owed. I dont see why markets should expect socialisation of all their losses.

        1. Anonymous says:

          Hi Guys

          There is another matter of nuance in that Eurobonds were presented in the past as a solution to the problems of the periphery of the Euro zone. I note that now they are just for the sovereign problem and the EFSF is being seen more as an answer to bank problems and recapitalisation.

          Whilst this is a nod to the poor design of the EFSF it also represents for the AAA rated nations a higher burden as they will be financing both. Presumably at some point the EFSF will be expanded although just in case anybody else listened to Bronwyn Curtis on Business Daily on the World Service today it has not happened yet. Whilst I am at it I do not remember the US growing by 4% to 5% per quarter either……..

          1. Sovjohn says:

            Hello Shaun, hope you are doing well, or at least reasonably well :)

            I have a question – We are seeing “moral hazard” dilemmas thrown left and right, but would anyone contemplate the position the “bailed out” countries find themselves in?

            The mantra that “They are to blame, so shush” is inadequate, in my ears. Heck, I’ve read as many economic articles, blogs, commentaries and stories in the past 2 years as I’d possibly had done in a lifetime, considering economics / finance are not related (directly) with my working life…

            I mean…

            Greece: Doomed. The statistics do show that. Apart from the statistics, when many previously healthy companies find themselves in the predicament of “Our customers won’t pay…” and “The bank(s) won’t lend us a penny”, they (surprise!) fold.

            When they fold, unemployment rises, revenue for the state coffers falls (taxation / social security / both really), the newly unemployed have no way to spend in the real economy, so they try to make do with help from relatives / friends, who themselves have less money to spare, and they don’t spend in the real economy, and then some other company claims “Our customers won’t pay”…and…

            Yeah, vicious circle as far as I’m concerned. I know for a fact that this has been going on since early 2010 nationwide, and even reasonably “fortified” companies may find themselves in a liquidity crisis and fold / become bankrupt / file for the equivalent of US Chapter 11, et al.

            This vicious circle’s break-up needs liquidity in the market. The banks don’t want to provide this (or can’t provide this, depends on who you believe), the state can’t provide this since it merely counts the days until the next EU/IMF loan, which it’ll use to pay existing debt first and foremost, not use it for any sort of growth, the market / consumption can’t provide this since it keeps falling like no tomorrow… What happens then?

            Ireland / Portugal: Ireland is “the poster-boy of austerity and compliance” and Portugal recently was hailed by the IMF for displaying a “solid performance in their quarterly review”. I suspect that it’s as “solid” as Greece’s second quarter into the IMF was. “Splendid”, until someone actually found out that several small streams of information gather up to make an ugly reality. In Portugal’s case, this could be no growth (NOT suprisingly), and in Ireland’s, the ongoing bank mess.

            Cyprus: The country is small enough to be entirely bought from the EU/IMF, yet I recall that it currently has yields which would force it to be “bailed out” if it needed immediate borrowing. With their explosion and infrastructure damage, I don’t expect them to get out of there soon, so in 2012 (?) we may welcome (?) another “comrade” in the EFSF…

            Italy / Spain: You know best. Big, bad ticking bombs ready to blow.

            France / Germany / The Rest: Throwing caps in the Jack Daniels barrel… “Feigning” ignorance. Until when?

            And Eurobonds are not the solution, at least not a financially sound one, even though it might be politically “digestible” compared to a breakup.

            But seriously – What the hell is going on in there? Has anyone asked the Irish and Portuguese (I’m not saying Greek, Greeks are demonized recently as the evil-doers of the planet, so skip us) citizens if they want to be thus “saved”?

            I recall the Irish Republic having a new government…Yet nothing good seems to have happened there, either. What should the people do, lynch their political classes out of existence? Because I think that we’ll come to that shortly enough, and not only in Greece… :(

            On a more personal note, I’ve decided to look for employment on pretty much a worldwide scale in the coming few months. I’ve had enough of being asked to “be content” when I’m unpaid for months on end, yet “I have a job”. Not for me.

          2. Anonymous says:

            Hi Ioannis

            I am well thank you and am doing my best to turn the various debates into useful action.

            I note what you say and have some thoughts for you.I do not see the Greeks as in any way evil and try to avoid simply stereotyping. I do see it as a country that needs some fundamental reforms and a complete change of its political system. However many countries need that including the UK.

            What does Greece need exactly?

            1 Supply side reform after supply side reform to get her in a position where economic growth is possible on a sustained basis.

            2. A tax system which in the main collects taxes.

            3. A substantial haircut in her debt much larger than the current scheme/proposal

            My point in listing these is that along the way Greece has been offered so many mirages and false dawns I am not surprised if many are sufferring from ennui and bail out fatigue. It is one of the reasons why I think that Europe’s politician’s have made a mistake with their hyperbole and bombast.

            So we have obfuscation piled on bombast and moral hazard aplenty before we even get to the fact that the EU itself is hardly in a position to lecture anyone on good book-keeping.

            Greece does not have to fold it simply needs someone with some intelligence and integrity to get a grip on the situation. Sadly the world is short of such people as we stand and it is a long way from only Greece that needs them….

            As to you and Vassilis and indeed Greeks in general I only wish you well and to answer his point yes I am sure I am influenced to some extent by being in the UK. However I keep as informed as I can and am pleased to get so many replies/comments from so many different countries as I feel that helps to widen the mind…..

  2. The Eurobond is a political question for Germany.. and at the moment the German people are dead set against it. Schaubel this morning ruled them out again. Would they agree to it if the Euro itself was in meltdown mode ? Possibly. 

  3. J.Wright says:

    Of course the Greek austerity isn’t going well, the austerity is killing the economy which means the Greek government gets less money which leads to a bigger account deficit which means more austerity etc. A nice little viscous circle.

    And yet we’ve been told that the Greek isn’t implementing the austerity correctly… I wonder why?

  4. graeme_b says:

    “A policy of issuing Eurobonds can be presented as a crisis response and the deeper agenda of fiscal union can move forwards. The basic problem is that there are potentially heavy costs for the surplus nations and I cannot see their voters approving it.”
    Well, unfortunately for those voters, it is their representatives that will approve it – the voters cannot stop them (at least, not until long after the event). The arguments of Soros et al. almost leave one with the feeling that they would positively *like* to see Germany shackled into system of perpetual transfers to the rest of EUrope…

  5. James says:

    So, we are now reaching the endgame. Being in the Euro will mean joining a fiscal union. So, it’s goodbye to:
    1. Greece, Portugal, Ireland, Spain, Cyprus and possibly Italy;
    2. Democracy. Not one country voted for this;
    3. Anyone else who gets in the way of the Sarkozy/Merkel project to save the Euro at whatever cost.
    How did we get here?

    1. Anonymous says:

       I think it’s Sarkozy’s plan to make German taxpayers subsidise French banks, Merkel is a ditherer who avoids hard decisions. Her nuclear flip-flop should show her as “no plan Merkel”

      This needs another treaty to amend the Lisbon rules, for which I think Dave Cameron owes us a referendum …..

      1. James says:

        I think that you will find that trivia such as full blown fiscal union together with a United States of Europe will come under one of two categories:
        1. A tidying up exercise not worthy of a referendum; or
        2. A fait accompli, again not worth wasting money on a referendum.
        You little people must learn that our great leaders know what is best for us. We will ask your opinion when necssary but not otherwise.

        1. Anonymous says:

          I agree that our politicians are unlikely to call a referendum, but they should not expect my vote after cheating me.

          1. James says:

            I totally agree. Although my earlier comments were obvuiously sarcastic, I feel extremely aggrieved at the incredible manner in which power and money are transferred to brussels without our consent.
            To anyone who says that we have an elected European parliament, you should always ask:
            1. Who is your local MEP?
            2. What measures are going through the European parliament?
            3. Who are the leading groups in the Parliament?
            4. What are their manifestos?
            I have never met a single person who can answer these questions, which tells you how far we have come from controlling our destiny. Whatever you do or don’t think of the Uk system, most people have a rough idea of the above and can vote accordingly.

          2. Anonymous says:

            My local MEP is Nirj Deva, who does not bother to reply to my emails. By doing nothing he is essentially stealing public money, but that appears to be common practice in Brussels. 

            I think we should have many referendums – it avoids what George Soros calls the “agency problem” – politicians putting their own interests first. Switzerland does have many referendums and it is one of the best managed countries in the world.

  6. Anonymous says:

    I believe that most of the comments here come out of the Eurosceptic mind (just an observation I am not judging, the climate is very very different of you hear and speak with e.g. Italians, Spaniards, French, almost everybody is for E-bond). The EU project has been and will be about the creation of USof Europe. Nothing more, nothing less. There is already a lot of sovereignty moved to EU from the member states (no prob for the Europhile nations) and the Euro makes it imperative that this process continues and it will continue. Of course with radical changes on EU structures that will resemble US so that there is democratic legitimacy. You forget that the majority now is in trouble not the minority and the trouble will continue if fiscal union does not happen with the central control that won’t allow the Greeces and the Italies to go their own way on borrowing and spending. Actually, there is one and only one alternative: Germany and its satellites move out of Euro, however I find this unlikely as it is a political bomb. I think that despite the difficulties and assuming that EZ wants to sustain itself (as I believe is the case), E-bond is a mathematical certainty. I am pretty sure that the public opinion in Germany can change. 

    1. Drf says:

      Hi Vassilis: but surely the problem with this argument is that an increasing number of EU electors do not want dictatorship by an unelected Council of Ministers, who hate and despise democracy because it limits what they can do? This is the problem with the present concept of Fiscal union and the creation of a United States of Europe; in its present and only possible future form as it stands there can only be extreme Socialism without democracy, rather as there was in the USSR.

      Not all Europeans are happy about that prospect. Many are extremely fearful of it including me.

      1. Anonymous says:

        USE means an elected European parliament or similar. Of course it will take time for this to happen, at least a mixed system is a must now. EU has to become more democratic, so direct elections is a must.
        I am also extremely fearful of the present extreme capitalism without democracy. Do we have real democracy now? I don’t think so. People have to endure the requests of a crazy casino-type of capitalism with an unstable structure full of negative feedbacks. It is about time that the pendulum goes the other way and a system that puts the interests of the people and not the markets in priority. At present, markets do not work in the interest of people. Balance has been lost after the end of cold war.

        1. Drf says:

          Vassilis_101: What you describe as “extreme capitalism without democracy” is no such thing” The reality is that at present we have essentially liberal Socialist governments who have socialised the losses and debts of the banks and others from time to time, without seeking the approval of electors and taxpayers! That is not capitalism at all. Hand in hand with that idiocy we have less and less real democracy. Once politicians gain power they now conveniently forget completely what electors voted for and want, and do their own thing. That has no resemblance to democracy, and leads to the political profligacy which we have suffered increasingly, resulting now in irredeemable public debts.

          It seems from what you post here that your leaning is essentially left-wing, so no wonder you relish the prospect of a Nazi-style USSE? When you post phrases like “At present markets do not work in the interest of people.” it is fairly clear what your orientation is. Markets NEVER work in the interest of the populace at large nor have they ever done so. Mr. market has a mind of his own. Your evident wish is typical of the sort of “injustice” which Socialism believes it can correct and the basis of its fatuous ideologies. “Every member of the populace must be equal regardless of what they contribute or input to the economic equation.” It is exactly that which has led to the present economic precipice. 

          I am in acute anguish at the prospect of further non-democratic integration of Europe, and plan at present to get out of the EU before it is too late with my family. I have already suffered at the hands of the EU too many sequestrations of the freedom and rights which I previously had. Escape is what many had to attempt to do when it became increasingly evident what the trajectory was going to be in Nazi Germany before the last World war. Those who are awake and aware realise that we now face a similar need to escape from the EU.

          1. Anonymous says:

            I think you misunderstood me. As you say that extreme socialism leads to non-democracy, a socialist can claim the same about extreme capitalism, and as you say that we have no capitalism (and you explained why very vividly and I agree), a socialist will say that in USSR they had no socialism at all. I am neither a socialist nor a capitalist. I believe in the necessity and usefulness of markets but under strict regulations with checks and balances from state in the name of the people who vote. Otherwise it is dictatorship of the markets, a mirror image of USSR. I dislike both extreme wealth and extreme poverty not because of ideology but because practically this leads to unbalanced broken societies and the necessity of guns to defent the inequilities. I believe in a liberal society and economy but with justice and compassion for the poorer. Even Adam Smith if I recall well warned about the problems if the poor become too many, society will collapse. I don’t think that this is socialsm, I think it is just common sense. Both centre-right and centre-left parties of continental Europe used to offer such approaches during the cold war but after 89 slowly but steadily everybody (even left-wing parties) became extreme right-wing for traditional central European standards. The current global problems stem from a twisted type of capitalism as you describe, not socialsm (a badly designed capitalism can be a lot of things but not socialism). A balanced approach towards markets and the wellfare of people is needed. Currently we are unbalanced. Markets are means to an end, not the end, if markets don’t work for the benefit of people need to be redesigned, not abolished. I strongly believe that capitalism can be reformed and be successful.

          2. Drf says:

            Hi Vassilis_101, I apologise; it seems I did misunderstand your position. To a large extent I agree with most of your points, except that you seem to fail to see that the present EU is riddled with and controlled by blatant Socialist policies, and collective dictatorship.

            As one example: when the people of Ireland were allowed a Referendum on the new Treaty (eventually disguised as something else) they rejected it. That did not suit the unelected Council of Ministers who then stated “No, that is not the democratic answer which we wanted. Now vote again the opposite way.” They then used all sorts of tricks and conditioning to get the “vote” they wanted!

            Present supposed “capitalism” is rigged; it is not real capitalism. There is no proper free market in financial trading; there is no free price discovery mechanism any longer. As a result markets do not work as they should and Mr. Market does not have his way because markets are manipulated and controlled. Another problem is that Stock Exchanges no longer fulfil their original and only real purpose, but have become rigged casinos. This distorts and inhibits the real wealth creating processes.

    2. “E-bond is a mathematical certainty”

      I’m beginning to understand that simply issuing an E-Bond is’nt so simple.. it could involve parliamentary votes, referendums, negotiations, court challenges, and for all who should agree, a disturbing loss of sovereignty. The problem with this is that such a venture requires time. In a crisis, the markets want an answer NOW. TODAY. The only time E-bonds come to the forefront is in the midst of a crisis.. forethought and planning to implement such a plan seem to be lacking up to this point. 

      IMHO, Europe’s financial system is having a series of mini strokes: first the Greek crisis of last year, then Ireland, then Portugal, and this month comes Italy. Yet the E-Bond has not been introduced in any Parliament. At some point in the near future, Italy and Spain will become unable to hold up their end of the EFSF. Even France looked a little shaky last week. When the number of countries needing a bailout exceeds the number of countries doing the bailing, the markets will demand an answer TODAY. It’s at this point that— 

      1. The French and Germans either can begin a bailout so big it would likely threaten France’s solvency, or..

      2. The ECB {with an assist from The Fed, the PBoC and with Germany’s backing} vastly expands the SMP and begins purchasing failing sovereign bonds and bank stock, and waive the rule on “sterilization”.. this is flat out monetization, and since The Fed and PBoC also participate, the Euro does’nt crash too badly in relation to most other fiat currencies… with the Swissy and Yen soaring. Germany, who has been resisting this, finally agrees when faced with financial Armageddon. As the Yen appreciates, Japan is strangled by deflation and a new phase begins.

      3. Germany and it’s Nordic cousins bolt the Euro.

      My bet— The Catastrophe behind Door #2

  7. Michael says:

    Yes Shaun, re you last section, just in the same way a pensioner pays 40% tax at £19K per annum!!!! So £100k per annum whingers should put up and shut up!
    A pensioner loses his personal allowance from c£10k down to c£5k on every £ of income over c£19k he gets from extra pension or interest on money saved for over his lifetime. – Scandalous!!!

    1. Anonymous says:

      Hi Michael and welcome to my portion of the blogosphere.

      I cover a lot of ground and cannot detail everything each day but I do have form in this area and completely agree with you. On the 22nd of March last year I wrote this.

      The UK 2010 Budget: Our position and my recommendations

      3. I feel that addressing the “poverty trap” will help the supply side of the UK economy and we should set measure in place to end it. I have written articles on this before.One of the ways that we can help our solvency problem is to make our economy more efficient so that it can grow faster and I believe that this would help.

      Since writing this section on the poverty trap time has passed but I feel it even more strongly now. I have come across other examples of high effective tax rates in the UK income tax system but these are much higher up the income scales for example where family benefits are withdrawn at around the £50,000 income level and an individual is paying 40% tax and 1% national insurance leading to an effective tax rate of up to 77% as well as above £100,000 where the withdrawal of the personal allowance leads to effective tax rates of over 60%.

      These are wrong but my priority would remain at the lower end of the scale where people are disincentivised to work by the way benefits are withdrawn and can have marginal effective tax rates of up to 90%. I would announce that I would spend £2 billion in this coming year on this and state that I intend to return to it in future years. You see we have to improve our economic growth prospects going forward and making our economy potentially more flexible and dynamic has to be a good start. I would like to do more but we simply cannot afford it.

      In today’s article I was thinking more of the economic concept of the Laffer curve rather than an outright policy prescription and also noting that if a 50% rate is too high then surely 60% is worse… However as a policy prescription I would have already started.

  8. Fletch says:

    Actually I thought the problem with taking away benefits from rioters is it produced a two tier justice system.  The rich get £80 fine whereas council house tenants are given a £80 fine and then made homeless.  I know the PM has made it clear today he thinks all criminals and rioters are single parent council house dwellers so may be assuming that all the rioters can be made homeless.

    As soon as they send one player off for swearing at a referee as they say they will then the problem will improve, though there are a lot of foreign languages in the premiership.

    OK token Economic question.  What happens in the US?  The individual states have their own debt, I suppose they benefit from the assumption the national government will bail them out, despite some states going bankrupt.

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