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  Note:  Written aboard a ship on the Danube River, traveling to Prague, Czech Republic: Imagine a 3x3 Wellness Grid: On the X axis, we have three dimensions of psychological wellness:   1)  Happiness - How much joy we experience; 2)  Fulfillment - How much satisfaction and pride we experience; 3)  Energy - How much inspiration and excitement we experience; On the Y axis, we have three dimensions of wellness in life: 1)  Personal Life - What we are doing to develop ourselves as individuals; 2)  Interpersonal Life - What we are doing to maintain, expand, and deepen our relationships; 3)  Work Life - What we are doing to grow and succeed in the work we undertake. With this Wellness Grid, we have a handy weekly report card that enables us to track over time how well we are maximizing the quality of our lives.  We also have a framework for tracking the synergies in our lives:  the degree to which improving one area of life cr...

  We've seen a stock market that has been rather weak over the last couple of weeks.  Higher interest rates at the long end have particularly impacted rate-sensitive sectors, such as utilities and real estate, and have provided support for the U.S. dollar and dollar-related carry trades.  Speculation has shifted from imminent recession to an environment of "sticky" inflation and rates that are likely to be "higher for longer".  So is the recent pullback in stocks an opportunity to participate in the longer-term uptrend, or is it a warning to preserve capital? Let's step back a minute. I observe two problems among market participants.  The first is to construct trades without underlying robust ideas.  Traders who look to charts for "setups" are particularly guilty of this mistake.  The second problem is to generate big picture, top-down narratives based on fundamental data, but not anchor these themes in well-analyzed trades that provide favorable r...

  While writing my next book, I came across a thought-provoking essay from a well-known Jewish Rabbi, Zalman Schachter-Shalomi.  His topic was the opal stone that we see in jewelry. The opal gem consists of small silica spheres and gaps between the spheres, which in one context could be considered flaws.  However, the very gaps that occur on the opal's surface are what create the opal's beauty when light is shined .  The light rays are diffracted by the spheres and gaps, which break the light into a fiery array of component colors.  The Rabbi's point is that we are like opals:  what are our flaws when viewed one way become our greatest sources of beauty in a different light.   Our flaws, in the right light, are our strengths. For example, in one light, our ambition and achievement orientation are flaws, leading us to become so wrapped up in our work that we neglect our health and relationships.  Those flaws lead us to trade from the ego ,...

  The most recent post took a look at why we can perform well in markets, only to suddenly make poor decisions and blow up.  Now we'll examine a second common complaint of traders, especially in recent markets:  how we can develop good ideas for trades but then get chopped up in actually trading those ideas.  Most often this occurs when we are counting on momentum or trend--shorter or longer-term extensions of directional moves--only to experience reversals.   Getting chopped up can cause considerable psychological frustration, but I'm not sure it's a purely psychological problem.  Let's look at the last 10 years of data from the stock market to illustrate the point: For the first investigation, I broke down the daily closing cash VIX level into quartiles and examined the forward returns in the SPX.  When VIX has been in the lowest half of its distribution over the past ten years (below 16.66), the next five days in SPX have averaged a gain of on...