Groups and Gangs, Leadership Quality and Ourselves

In the alternative investment media I read a lot of criticism of the leaders of countries, and corporations, and also banks. There seems to be a view that leadership is lacking, or should I say good leadership is perceived to be lacking. On the other hand, bad leadership is in common supply. So what is going on?

The person who rises to the top of a large organization, like a multinational corporation or a nation surely can not get there without being good at something. So either the people who choose the leaders are unwise or uninformed, or simply a bad judge of these things, or it’s a fix, and the leaders rise through the ranks against the opposition and competition of their peers because they have an invisible supporting sponsoring power acting on their behalf. They have “pull”.

I think it’s actually a bit of both.

For example, it is often said that the elected leadership are - let us say - not the sharpest tool in the box. Comedians make a good living about putting this across in a pithy and humorous way, and I rarely see someone get up to heckle such a tirade act.

So is it true? Well the same alternative media tend to comment about the lack of awareness of many of the population … the “sheeple”. Isn’t it possible that the sheeple have gotten politicians who represent them exactly? That is, the political leaders are merely senior rank sheeple?

But if we look into this it does not take long to discover that many of the leaders have had interesting pasts, like careers in intelligence, or the military, or they have law degrees which I am sure do not get handed out willy nilly. So what gives? One possible explanation is the wolf in sheeple’s clothing. (I apologize for bastardizing the classic fairy tale story by either or both Charles Perrault and The Brothers Grimm.) But I think this has merit. The ruthless either (A) wish to be seen as almighty and feared and (thus) respected, or (B) they wish to hide and masquerade as the best friend to be trusted(which of course provides them with opportunity and a ready supply of fresh meat to work on). This is plausible.

Now if we add the requirements of democracy, the need to acquire votes rises in importance. The ruthless leader gets elected when the sheeple desire his cruel-power qualities, maybe during wartime, and during the rest of the time the winning leaders look like that avuncular father-grandfather figure who has broad appeal, in a similar way that presenters of evening family shows do.

So the masses choose. They actually select out from the pack, and vote into power, ruthless smooth talking liars who look friendly. What a surprise that world affairs turn out the way they do!

Now this brings in the idea that we all already have the leader we desire, or that we deserve, or a personality whom we wish we were more like ourselves. And it is a sad statement about modern society, that we only get that far in the thought process of choosing leaders who will have control over our futures and our lives.

But be that as it may, there is another leader who has followers and disciples and representatives, that I would like to discuss. But this leader is a thing rather than a person. I am referring here to the price of our investment assets.

Cast your mind back to last week, when the price of gold and silver made a nice jump upwards. The prices of these assets broke upwards through a longstanding downtrend line, under which they has been confined, and been reduced for a year and a half.

Now some people look at charts and other people don’t. Some people read the news, others watch audio-visual news. We all have our different sources, upon which we receive the information and consider the state of the world as we see it.

So here is the 64,000 dollar question: When gold and silver rose in price, did you become more optimistic, and more positive after?

Be honest. It’s important so I'll wait....

Read on when you have answered to yourself as honestly as you can.

If you did, then your psyche took leadership from the price of silver or gold, and that altered your view of the world. The price became, for a while, your leader, and controlled your thoughts and judgment.

Maybe you use technical tools to evaluate the market, and you reply “I am not controlled by anything. I have no judgment in my trades my trading system does it for me!” Well maybe it does, but when price moved above your favourite moving average, or when your “system” was triggered by the price moving up, what exactly happened? The price instructed the system, and the system instructed you, and you accepted the orders from above.

Leader = guide = master of a group to whom decisions are delegated. That group could be the Republicans or the Democrats, but it can also be the Bulls or the Bears in the markets you trade.

So are you totally sure there is no “Pied Piper” playing a seductive tune for your subconscious? This requires to be rechecked often, because the worst weaknesses always come back when you stop looking for them.

From Tony Plummer’s excellent "Forecasting Financial Markets the Psychology of Successful Investing" (now in it’s 6th edition) have a read of this:

Energy and self-knowledge, in turn, contribute to the crowd’s ability to be self-organizing. Self-organization involves the control of the crowd’s members, and this enables the crowd to maintain its autonomy as well as to learn, adapt and evolve. In somewhat technical language, we have described the behavioural haracteristics of Le Bon’s ‘crowd’.

Aha! He just mentioned LeBon. The author of “The Crowd”.

Le Bon was one of Adolf Hitler’s favourite authors I believe. But please do not hold this against him. Hitler probably read everything there was to read about crowds and their motivation and control, so that's not Le Bon's fault!

His book was written rather a long time ago. Gustave LeBon was born in 1841 and died in 1931.

But given the “crowd – leader – individual” hierarchy I have described above, for a trader who values the power of independent thinking it might be a good idea to look at what he wrote in “THE CROWD A STUDY OF THE POPULAR MIND” .

Here is a sample:

“When, however, a certain number of these individuals are gathered together in a crowd for purposes of action, observation proves that, from the mere fact of their being assembled, there result certain new psychological characteristics, which are added to the racial characteristics and differ from them at times to a very considerable degree.

Organised crowds have always played an important part in the life of peoples, but this part has never been of such moment as at present. The substitution of the unconscious action of crowds for the conscious activity of individuals is one of the principal characteristics of the present age.

I have endeavoured to examine the difficult problem presented by crowds in a purely scientific manner—that is, by making an effort to proceed with method, and without being influenced by opinions, theories, and doctrines. This, I believe, is the only mode of arriving at the discovery of some few particles of truth…….. To belong to a school is necessarily to espouse its prejudices and preconceived opinions.

……. why, for instance, after noting the extreme mental inferiority of crowds, picked assemblies included, I yet affirm it would be dangerous to meddle with their organisation, notwithstanding this inferiority.

The reason is, that the most attentive observation of the facts of history has invariably demonstrated to me that social organisms being every whit as complicated as those of all beings, it is in no wise in our power to force them to undergo on a sudden far-reaching transformations. …….which explains how it is that nothing is more fatal to a people than the mania for great reforms, however excellent these reforms may appear theoretically. They would only be useful were it possible to change instantaneously the genius of nations.

…… Men are ruled by ideas, sentiments, and customs—matters which are of the essence of ourselves. Institutions and laws are the outward manifestation of our character, the expression of its needs. Being its outcome, institutions and laws cannot change this character.

The study of social phenomena cannot be separated from that of the peoples among whom they have come into existence.

Given that something as simple as a price, can take leadership of real people and their investing purchasing power, any book which has chapters entitled: THE IDEAS, REASONING POWER, AND IMAGINATION OF CROWDS or THE LEADERS OF CROWDS AND THEIR MEANS OF PERSUASION is likely to make mighty interesting reading. But only if you honestly admitted that you are just as easily hooked as everyone else! It’s difficult to improve on perfection! Me? I know I’m a mere mortal …..

So the next time you hear your mouth or keyboard criticize the leadership’s ineptitude, foolishness, or evasive ethics, take a quick look at your peers, look at your motivations, including things as seemingly innocuous as the price of silver or gold or the stock market, then look inside. Are you "fitting in?" Is your thinking really all that independent as it appears to be? If not, then what things outside are being judged incorrectly right now, and in the past?

Here is a starting point:

Crowds, when they lose a leader, get disorientated, feel lost, and confused, and may mill about aimlessly, paralyzed from taking action. If you are a bull, and long something like let’s say, gold, and the price falls, then the bull crowd leader has gone absent for a period while that happened, right?

Well, did you, the member of the bull crowd, feel any of the above emotions inside the last time that happened? If you did, you’re human! But you do have a Pied Piper that can lead you astray in the future if not safeguarded against. Prepare and take countermeasures!

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.


Author's comment: if you look Plummer's book up on Amazon, there are a couple of bad reviews. Don't let them put you off! They are, in my opinion, ill advised "Pied Pipers", who don't recognize this insightful source for what it is. His latest book is very advanced and specialized for Gann students, and not like Forecasting (discussed above) which has broad appeal, and I'll review that separately.

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Key Economic Events Week of 5/20

5/20 9:00 ET Goon Waller
5/20 10:30 ET Goon Jefferson
5/21 9:00 ET Goon Waller again
5/21 11:45 ET Vice Goon Barr
5/22 10:00 ET Existing home sales
5/22 2:00 ET May FOMC minutes
5/23 8:30 ET Jobless claims
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5/23 10:00 ET New home sales
5/23 3:00 ET Goon Bostic
5/24 8:30 ET Durable Goods
5/24 9:35 ET Goon Waller again
5/24 10:00 ET Umich final

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