There are many ways to interpret the well-known saying as it applies to financial markets. In any case, the catchphrase we put in the heading carries valuable information for everyone interested in stocks and investments.
Money is surrounded by numerous beliefs and superstitions – and this is only natural, since financial prosperity is one of the greatest goals in life for many people. These superstitions are mainly taboos: you can’t hand out money at night, you can’t whistle at home, you can’t leave your keys on the table...From this point of view, the saying of ‘money loving silence’ has a quite simple interpretation: too much talking can ‘cast an evil eye’ on your financial success.
Whether you believe in the evil eye, superstitions and other mystical stuff is an entirely different matter. Let’s just say that many rich people remain surprisingly modest on the outside, not willing to show off their fortunes. Unlike the proverbial “new Russians” whose indiscretion once became the topic for numerous jokes.
Warren Buffet’s simple life can be a great example in this regard. This multi-billionaire still lives in a house he bought in late fifties and dines at a fast-food joint. He buys his clothes at sales and rides a car he bought secondhand ten years ago.
But this is clearly not what made Buffet so rich – his financial genius is beyond doubt. In other words, superstitions alone are not enough; there must be something else there. Even if you move all the furniture around your office to follow Feng Shui, hang a bunch of lucky charms around your neck and only open transactions at full moon to the sounds of Shaman’s drums – you are not likely to become any richer. Who knows, though…
Leaving mysticism aside, talking about your money and demonstrating your prosperity – if it has been acquired legally – is generally ok. But it can be a disaster in investment activities and stock trading.
By sharing his trading plans and his vision of the market with his colleagues, a trader – particularly an inexperienced one – can fall into a psychological trap. Feeling stubborn, overly confident, and unwilling to publicly change one’s opinion and admit one’s mistake often make a trader stick with the bad decision until the very ‘margin call’. Naturally, it is much easier to change your opinion if nobody knew about it in the first place. Personally you don’t really care where the market goes. As long as it brings profit.
Even experienced traders fall into this trap. Larry Williams, a famous trader, described a very indicative episode from his own practice in his book “Trade Stocks & Commodities with the Insiders”. Talking live on Tinseltown talk show, he went into an argument with another famous trader who had a different opinion as to where the market was heading. Williams lost a lot of money back then, opening lossy positions out of spite. “Under normal circumstances, I would have taken a second look at the market – the signals were clear”, Williams wrote. “But trying to prove myself to the TV viewers, I ended up losing a lot of money.”
“Talking about our future deals opens the doors to a trader’s hell” , Williams summed up.
To speak or not to speak ?
The good news is psychological problems can be resolved. Williams eventually subdued his publicity phobia. Now he runs transactions worth hundreds of thousands of dollars right in front of his paid training course audiences – and even shares some of the profits with his ‘students’.
Some financial companies have been successfully operating offices where traders receive invaluable experience by sharing their strategies and opinions of the market situation. In some hedge funds, a psychologist is literally a full-time position.
So it turns out that talking about money – or not talking about it – is not as important as the ability to control one’s emotions. On the other hand, modesty is always the best policy, superstitions or not. Just remember, talk is cheap, trading is not...