Michel Pireu
21 August 2008
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Johannesburg — IN A contribution to Daily Speculations, self-styled philosopher, trader and investor Jim Sogi, explains how on a recent trip to the upper Amazon jungle he noticed a similarity with stock markets.
"The jungle has the greatest biodiversity with thousands of species each occupying a specific niche," he says.
"The only direct conflicts we saw were between two spiders, and two monkeys fighting over the same niche. The forest had three main levels, first at the ground to 15m, 15m-35m and the canopy above 35m.
"The occupants and action at the bottom of the forest are much different than those in the middle or top. As in markets, different techniques are needed at tops, middles, and bottoms.
"It is hard for one species of trader to hope to avoid death at all the levels. It is very hard to start on the bottom of a market and survive to the top.
"Extreme specialisation is the rule in the jungle. There is no reason that same type of specialisation would not be required in the market. However, in many ways current markets lack real diversity.
"The correlation among markets has been a result of this lack of diversity. There are too many players in the same niche or trade. Lack of diversity causes inability to absorb market shocks. In the jungle, when a large 800-year-old kapok tree falls a huge gap is created. Many species rush in to fill the gap, but due to the rush the vegetation is weak. Similar action may occur in market gaps when a shock hits. Initial occupiers of the gap are weak holders.
"The jungle canopy cuts out most of the light. The jungle floor is dense and dark filled with creepy crawlers. It would be easy to get lost. But the macaws travel at dawn to the clay licks located on the riverbanks. The macaws are large, brightly coloured and make a noise. At dawn they are easy to follow. Likewise, the information in the dawn trades as a directional tool for the rest of the day's trade.
"In the jungle there are small streams that caiman like to use. One might use the flow direction to determine the direction of the larger river and follow that. The obvious trade parallel is to follow the flow of the orders of the bid or ask
"The tapir makes vague paths through undergrowth through habitual use. There are meals for life in following well worn trading price paths habitually used in the market.
"To survive, both in the jungle and the market, you must recognise the subtle nuances that signal danger and opportunity. But follow yesterday's signals and you'll get eaten alive."
Nigel Davies says: "Coincidentally, the Independent newspaper featured a story today on a tribe only recently discovered. I can't help but think it is they who possess the real secrets of Amazonian survival."
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