Psychoanalyzing the Markets

My dad was a psychiatrist. He was also a very talented investor. I used to ask him how he was able to do so well and he told me that it was just a matter of "psychoanalyzing the market". He thought of the stock market as just another crazy patient badly in need of therapy. At the time I thought he was the crazy one.

Crazy like a fox, as it turns out. It's hardly a novel observation that the stock market runs on two things: fear and greed. Understand those, and you understand the market. I know, easier said than done. That's one reason I liked Dr. Brett Steenbarger's blog so much - he talked a lot about psychology there. "The market" after all, is just a reflection of the people who make it up. As a technician, I've recently come to believe that perhaps I should pay more attention to the psychology and the psychoses of the players.

Anyway, there's no shortage of proof on how this works. Consider the airlines. My dad deemed the airline industry to be "completely psychotic". He claimed that only a psychotic would get into such a business. And if you look at the lunacy going around the airlines these days, what with fares that change every five minutes and fees for all kinds of nonsense from pillows to carry-on bags, it's hard to disagree. I personally would not touch an airline stock with a 10 foot jetway.