31st August 2012: Ryan, Rand & Traders

TNR‘s Leon Wieseltier observes about US vice presidential candidate Paul Ryan:

 

“The moral symbol of respect for human beings is the trader,” as John Galt instructs. Self-reliance, which Ryan falsely construed as the trader’s most essential characteristic, became Ryan’s supreme ideal. . . . The splendid isolation of the trader, the builder, the innovator, the entrepreneur, the superman, does not exist. It is one of the many flattering legends that successful people in this country devise about themselves. (Like the legend that success is a proof of personal virtue.) The individual—even the individualist individual—is always situated densely in the customs and the conventions of society.

 

The trader’s key skill is arbitrage: finding mispricings in the market and taking advantage of investor psychology, macroeconomic conditions, timing, and volatility. This requires an intense awareness of who else is on the other side of the trade. It involves Other People’s Money. The cumulative actions of others can change a security’s valuation and market dynamics. Effective trading involves thinking several steps ahead — knowing that other fund managers and traders will be doing the same. This involves both immersion in society’s financial markets and the trader’s cultivation of self-sovereignty as a separateness from it: standing apart to evaluate the probable market dynamics, risks, and arbitrage opportunities. It is why many traders begin with Gustave Le Bon, Charles Mackay, Jessie Livermore, and Charles P. Kindleberger. The ‘isolation’ ideal evolved from Ayn Rand via the 1980s Masters of the Universe to contemporary hedge funds, quantitative funds, and high-frequency trading firms.