Morgan Stanley, Tom Watson and Recovery

Today’s WSJ reviews Morgan Stanley’s 2nd quarter on page C1 and on D8 prints what they might not have realized should have been a companion article. It pictures tennis’ Andy Roddick and golf’s Tom Watson in “After an Epic Loss, Then What?” which discusses “soul-crushing defeats“.

Now we take for granted that losing the title at Wimbledon after the longest 5th set played requires some down time to get one’s head “back together”. What on the other hand we don’t take for granted is that trading losses – or the near death experience of your whole trading desk as in the case at MS – requires the same sort of psychological process. A sports psychologist is quoted as “take a day” but the truth is managing your psychological capital takes as long as it takes – and is the single most important task any athlete, trader or even CEO like John Mack has on their plate.

Today’s neuroscience proves that the residual feelings resulting form one event can completely color your beliefs about the next event. It also proves you can’t act – or even make a decision – without emotional inputs. Therefore, managing those inputs – in the way that works – is a singularly profitable (and winning) endeavor.

Step One – Accept and embrace everything you feel about a trade that didn’t work.

Step Two – Put all of those feelings into words – writing, typing, talking, yelling… I don’t care. The key as the brilliant psychoanalyst Hyman Spotnitz said is to “Say everything.” (Note words are JUST words and feelings are JUST feelings and neither one makes your future reality in and of themselves).

Now this sounds easy enough – but in reality it isn’t. The dominance of pop-culture thinking like The Secret” and Tony Robbins’ NLP make this embrace of ostensibly negative feelings a bit like being accused of spreading H1N1 flu. Like the sports psych said (in so many words) – get over it. Well forgive me but does that work with swine flu? Of course not, you take the drugs, you sleep – you manage your body so that it does indeed get over it – in its own time.

This is the exact same process traders – floor, MS or independents – need to go through to recover from losses. If they do, they will truly, thoroughly and completely get over it and in doing so, see the markets in a clear way – the surest way to judge the optimal amount of risk to take.

P.S. Call us Mack if you want help. I mean after all, why should our neurons recover any faster than our bodies?

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This Post Has 2 Comments

  1. dfriscia33

    Wow,
    Reading the above I am reminded of numerous times in my life when a negative comment or statement became a highly strong motivational force that helped shaped my life.
    Almost 12 years ago I had a very serious accident. I fell over 2 stories off a roof. When the time came to go to physical therapy the therapist during the first intake looked me in the eye and said, “You will never be 100% again”,
    BUT “That does not mean you cannot do 100% of what you did before or what you want to do in the future”.
    That one statement which some people would consider demoralizing has helped me accomplish and do so much more with my life the last 10 years than I could have ever dreamed of.
    There are so many negatives attached to trading.
    You can never win 100% of the time.
    There are 2 kinds of traders, idiots and morons.
    Learning how to trade is an expensive way to learn about yourself.
    I could go on and on.
    So why does the person who is confronted with the negative quit while the other person becomes highly motivated.
    Is it learned or is it how we are wired from birth?
    I think it is a little of both.
    I truly believe allowing young children to fail instead of always having someone there to catch them can lead them on the road to dealing with
    the huge amount of negativity they will have to overcome in their lives
    in order to be successful and be happy.
    I went off on a tangent there, sorry.
    Just remember folks no matter what you hear, trading is a great way to get to know yourself if your willing to work at it.
    The opposite of a negative is a positive,which in the real world attracts.

    Dominic

  2. dfriscia33

    Wow,
    Reading the above I am reminded of numerous times in my life when a negative comment or statement became a highly strong motivational force that helped shaped my life.
    Almost 12 years ago I had a very serious accident. I fell over 2 stories off a roof. When the time came to go to physical therapy the therapist during the first intake looked me in the eye and said, “You will never be 100% again”,
    BUT “That does not mean you cannot do 100% of what you did before or what you want to do in the future”.
    That one statement which some people would consider demoralizing has helped me accomplish and do so much more with my life the last 10 years than I could have ever dreamed of.
    There are so many negatives attached to trading.
    You can never win 100% of the time.
    There are 2 kinds of traders, idiots and morons.
    Learning how to trade is an expensive way to learn about yourself.
    I could go on and on.
    So why does the person who is confronted with the negative quit while the other person becomes highly motivated.
    Is it learned or is it how we are wired from birth?
    I think it is a little of both.
    I truly believe allowing young children to fail instead of always having someone there to catch them can lead them on the road to dealing with
    the huge amount of negativity they will have to overcome in their lives
    in order to be successful and be happy.
    I went off on a tangent there, sorry.
    Just remember folks no matter what you hear, trading is a great way to get to know yourself if your willing to work at it.
    The opposite of a negative is a positive,which in the real world attracts.

    Dominic

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