Space, Time, Nathaniel and The Gold Market

Mon, Mar 10, 2014 - 11:56am

I was child of the 1960s, which means that during the 70s I was in my teens. Like “the Curate’s Egg” There were good and bad parts to that decade. One of the good parts was that the genre of science fiction exploded from a tiny thing into a publishing deluge, and that was accomplished in the main by the emergence of a group of very gifted authors.

Arthur C. Clarke, Brian Aldiss, Robert Heinlein, Isaac Asimov, Philip K. Dick, Poul Anderson, Frank Herbert, Ursula LeGuin, Harry Harrison all come flashing to mind in an instant, in this regard.

The movie industry seems to still find much to produce from among the collective creative writings of these prolific authors, so great was their contribution of innovative ideas.

I especially appreciated the short story form of science fiction. This was demanding upon an author, because for each story an new reality, universe, planet, society, characters and plot had to be created. I’m sure writing a longer story would have been easier, though of course characters would have had to have more depth. But I really appreciated the freshness of the short story form, with every chapter of a book a whole new scene, different from the last.

I want to give a special mention to Brian Aldiss just now. He was a UK based author and editor of other authors’ anthologies of short stories, and a master of his craft.

In 1971 Aldiss wrote “Space, Time, and Nathaniel”. This book, in a time when acronyms were reserved for long names only and 3 syllable words were uttered without shortening became affectionately known as STAN. I think it was Aldiss himself who started that in an interview or public appearance.

The artwork which was in vogue at the time for these kind of books was stylish, even cultish, and fascinating. STAN was a good example:

The keynote short story in this book, of the same title, was about an artificially engineered creature called “T”. T was one of several similar creatures, each with a single letter for a name, made with only one purpose in life: to travel through space, and back in time, and reach the solar system wherein mankind lived on Earth prior to civilization, and destroy it completely. You see an alien race was battling man in the distant future, and losing, and figured out the best way would be to use the stratagem explained. So T and his comrades did their thing, some failed, some didn’t, and their objective was achieved as they went out in a suicidal joy of achievement. The future changed utterly from that point forwards but somehow things didn’t work out so well for their creators, later, in the future time and distant place from which they embarked upon their mission.

When will I get to the point and what is it this time? After all this is supposed to be about trading in gold, or something connected to it, right? Well, the first point is this, Aldiss wrote one of the first stories about “timesliding” without which we would never have enjoyed Michael J Fox’s Marty and Christopher Lloyd’s Doc in Back To the Future many years later. And timesliding is somehow a fact of life for traders in financial markets every day of their lives, but little appreciated for what it is.

Let me explain:

The average person learns a fact or piece of knowledge, accepts it’s veracity, and files it away. All future events are interpreted in the light of the fact which is now a part of the framework for interpreting new situations from that point onwards.

Maybe you already begin to get a certain vibe about what happens when we are persuaded by misinformationists and propagandists to accept and internalize faulty facts which form into flawed frameworks to judge new situations, and how to react to them.

Anyway to get back to the timesliding subject one last time: to alter the past would alter the future flowing from that past, and the present and future would suddenly change into a different alternate future because of that intervention in the past. This would time/space to “slide” into a different time/space which was basically the same world but with a different history, and a future which was the one that favoured “the other guy”, though nobody would be aware that their lives had changed for the worse.

That was fiction - but this is very real:

George Orwell played with this concept by suggesting that the past could be simply re-written, and that was sufficient to change the present and future. And he certainly had a point. Edward Bernays made a living out of investigations into and promotion of the manipulation of peoples’ view of realities and society to create a new future which favoured the masters behind these manipulations.

Now let us look at life for market traders

First I would wish that half the readership do not switch off at this point saying something like “that doesn’t apply to me, I’m an investor not a trader” or something like that. This does apply to you very much as you will soon see. It matters not if you are a short term trader or a longer term trader, and embrace the word trader and stop pretending an investor is different.

So there I and you are in the market, imagine that we are both in a long position and believe that due to our differing criteria it is a bull market and we are going to sell at a higher price, that asset which we have already bought at or about the current price.

So imagine if you will, that you are long Ferrari and I am long Maserati which are stand along company common stocks just for our example. A news item hits the wires that Maserati has made a fantastic engineering breakthrough which will provide a significant advantage in the future. Let’s say nobody knew this already (!!!) and it was real fresh news (!!!!!) so the markets discount it. The price for Ferrari falls and that of Maserati rises. OK so far with this imaginary world?

But tomorrow, another fresh undiscounted news item emerges. This time it says that 5 years ago Maserati infringed upon a patent owned by Ferrari and Ferrari are taking their opposition to court over this for 10 years earnings with high likelihood to win. What happens, the reverse of the previous day. Maserati falls and Ferrari rises today.

This second event was different from the first, in that the event happened in the past. Moreover although it happened in the past it had no effect at all, until this very day, and then the future switched into a new future as if there was a timeslide.

Now how can a trader/investor prepare for this? They can't prepare! Nobody can. They must just get on and live with it. They accept the fresh news and look to the fresh expected outcome to create a fresh valuation of all assets concerned.

But what the trader does is different from the ordinary person in the street. The trader in an instant junked the previous known paradigm, substituted the new one instantly, and began to walk forwards into the future without hesitation. The average person wants to stick with their previous notion of how the world was, and evolve into the new world. But price does not wait. The revaluation of the asset is instantaneous upon discovery and receipt of the knowledge.

It's a good idea to get rid of the old fixed framework of interpretation of facts when faced with a new reality - faster than those around you.

So when you listen to the news there are a few questions that matter:

Is it discounted already (almost certainly was before you heard it!) ? Are there more people remaining, with unadjusted mindsets who will have to buy or sell to adjust their positions (who will drive the revaluation further than it’s already gone)?

Is this timeslide done and dusted already, or are there more ramifications to flow from it? If so, what do I do about that right now? What remains that is undiscounted by other players, and what will their actions still to be taken, buying, selling, do to the price? That decides the size of the price move still to come.

Argentus Maximus

The author posts daily commentary on the gold and silver markets in the TFMR forum: The Setup For The Big Trade. More information about the author & his work can be found here: RhythmNPrice.

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